Case 3:05-cv-02047-CRB Document 61-1 Filed 04/07/2006 Page 1 of 44

1 EDWARD F. HABER (pro hac vice) SHAPIRO HABER & URMY LLP 2 53 State Street Boston, MA 02109 3 Telephone: (617) 439-3939

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7 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 8

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11 GEORGIANNA HANRAHAN, IRA, Case No. 05-CV-02047 (CRB) 12 individually and on behalf of all others similarly sitatuted, 13 AMENDED CLASS ACTION COMPLAINT 14 Plaintiff,

15 v.

53 State Street (617) 439-3939 439-3939 (617) 16 HEWLETT-PACKARD COMPANY and Boston, MA 02109 MA Boston, CARLETON FIORINA, 17 Defendants. 18

SHAPIRO HABER & URMY LLP 19 20 21

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27 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 TABLE OF CONTENTS 2 INTRODUCTION……………………………………………………………………………….….-1-

3 JURISDICTION AND VENUE…………………………………………………………………….-2- 4 PARTIES……………………………………………………………………………………………-3- 5 SUBSTANTIVE ALLEGATIONS…………………………………………………………………-4- 6 7 Information Regarding Walter B. Hewlett………………………………………………………-4- 8 Walter B. Hewlett’s Negative Views Regarding the Merger and His Opposition to the Merger……………………………………………………………………………………….-6- 9 The Defendants’ Public Statements and Filings Regarding the 10 Merger On September 3, 2001 and Throughout the Class Period……………………………...-16- 11 The Stock Market Responded Negatively to the Proposed Merger……………………………-21- 12 The Defendants’ Omission of the Omitted Material Facts Caused 13 The September 3, 2001 Press Release and the Defendants’ Other Statements and Filings Regarding the Merger During the Class 14 Period to be Deceptive and Misleading………………………………………………………...-29- 15 Hewlett’s Opposition to the Merger is Publicly Disclosed by Hewlett on 53 State Street (617) 439-3939 439-3939 (617) 16 November 6, 2001……………………………………………………………………………...-32- Boston, MA 02109 MA Boston, 17 The Defendants Acted With Scienter, With the Intent to Defraud……………………………..-34- 18 CLASS ACTION ALLEGATIONS……………………………………………………………….-36- SHAPIRO HABER & URMY LLP 19 COUNT I

20 AGAINST DEFENDANTS HEWLETT-PACKARD AND FIORINA FOR VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT 21 AND RULE 10b-5 PROMULGATED THEREUNDER………………………………………….-38- 22 COUNT II 23 AGAINST DEFENDANT FIORINA PURSUANT TO SECTION 20(a) OF 24 THE EXCHANGE ACT…………………………………………………………………………...-40- 25 PRAYERS FOR RELIEF………………………………………………………………………….-41-

26

27 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 AMENDED CLASS ACTION COMPLAINT

2 3 Plaintiff, through its attorneys, alleges the following upon information and belief, except as 4 to the allegations which pertain to the Plaintiff and its counsel, which are alleged upon personal

5 knowledge. Plaintiff’s information and belief are based, inter alia, on the investigation made by and 6 through its attorneys, including but not limited to the review of documents filed with the Securities 7 and Exchange Commission; press releases and other public statements of the Defendants and others; 8 and published books. 9 10

11 INTRODUCTION

12 1. This is a federal securities class action which is brought by the Plaintiff against the 13 Defendants Hewlett-Packard Company (“Hewlett-Packard” or “HP”) and Carleton Fiorina 14 (“Fiorina”), the former Chief Executive Officer and Chairman of the Board of Directors of Hewlett- 15 Packard, on behalf of a class (the "Class") consisting of all persons or entities who sold the common 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 stock of Hewlett-Packard during the period September 4, 2001 through November 5, 2001, inclusive

18 (the “Class Period”). Plaintiff seeks to recover damages caused to the Class by Defendants’ SHAPIRO HABER & URMY LLP 19 violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 20 10b-5 promulgated thereunder. 21 2. This action arises as a result of the announcement by the Defendants on September 3, 22 23 2001 of the proposed merger of Hewlett-Packard with Compaq Computer Corporation (“Compaq”) 24 (the “Merger”) and subsequent public statements and public filings by the Defendants from

25 September 4, 2001 through November 5, 2001 regarding the Merger. Those statements by the 26 Defendants regarding the Merger were deceptive and misleading because they failed to disclose that 27 Walter B. Hewlett (“Hewlett”) was opposed to the Merger, as detailed herein. 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 3. As detailed herein, Hewlett, who is the son of the co-founder of HP, the late William

2 R. Hewlett, and who, at all relevant times, was a Director of Hewlett-Packard, owns, controls the 3 voting rights of, and has substantial influence with respect to the voting of, hundreds of millions of 4 shares of Hewlett-Packard common stock. Hence, Hewlett’s opposition to the Merger significantly 5 6 decreased the likelihood that the Merger would be consummated. Accordingly, the Defendants’ 7 public statements and filings regarding the Merger, from September 3, 2001 through November 5,

8 2001, deceived and misled the marketplace as to the likelihood of the Merger being consummated, 9 by failing to disclose Hewlett’s opposition to the Merger, as detailed herein. 10 4. The Class Period begins on September 4, 2001, the first day of trading of Hewlett- 11 Packard stock after the Defendants announced the proposed Merger on September 3, 2001. The 12 13 Class Period ends on November 5, 2001, the last trading day of Hewlett-Packard stock prior to it 14 first becoming publicly known that Hewlett was opposed to the Merger, as a result of a press release

15 issued by Hewlett on November 6, 2001. 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 5. As demonstrated herein, the Defendants’ misleading and deceptive public statements 17 regarding the Merger on September 3, 2001 and throughout the Class Period significantly artificially 18

SHAPIRO HABER & URMY LLP decreased and deflated the price of HP stock throughout the Class Period. 19 20

21 JURISDICTION AND VENUE

22 6. This Court has jurisdiction of this action pursuant to Section 27 of the Exchange Act 23 [15 U.S.C. §78aa], and 28 U.S.C. §§1331 and 1337. 24 7. This action arises under and pursuant to Section 10(b) of the Exchange Act [15 25 U.S.C. §78j(b)], Rule 10b-5 promulgated thereunder by the SEC [17 C.F.R. §240.10b-5] and 26 27 Section 20 of the Exchange Act [15 U.S.C.S. §78t(a)]. 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 8. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28

2 U.S.C. §1391(b). The Defendants are located in this District and acts complained of herein occurred 3 in this District. 4 9. In connection with the acts alleged in this Complaint, Defendants, directly or 5 6 indirectly, used the means and instrumentalities of interstate commerce, including, but not limited 7 to, the mails, interstate telephonic communications and the facilities of the New York Stock

8 Exchange, a national securities exchange. 9

10 PARTIES 11 10. Plaintiff Georgianna Hanrahan, IRA, (“Plaintiff”), is the IRA account of Georgianna 12 13 Hanrahan, a natural person who resides in Norwalk, Connecticut. As detailed in the Certification of 14 the Plaintiff, attached to the original complaint filed in this action, the Plaintiff sold 255 shares of

15 Hewlett-Packard common stock during the Class Period. The Plaintiff did not purchase any 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Hewlett-Packard common stock during the Class Period. 17 11. Defendant Hewlett-Packard is a Delaware corporation, with its headquarters in Palo 18

SHAPIRO HABER & URMY LLP Alto, California. It is located and does business throughout the United States and internationally, 19 20 including in this judicial district.

21 12. The Defendant Carleton Fiorina was, at all relevant times, Chairman of the Board of

22 Directors and Chief Executive Officer of Hewlett-Packard. On February 9, 2005, Fiorina was fired 23 as the Chairman of the Board of Directors and Chief Executive Officer of Hewlett-Packard. 24 13. The Defendants Hewlett-Packard and Fiorina are collectively referred to herein as the 25 “Defendants.” 26 27

28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 SUBSTANTIVE ALLEGATIONS

2 Information Regarding Walter B. Hewlett 3 14. Hewlett is the son of the late William R. Hewlett, a co-founder of Hewlett-Packard. 4 Prior to the Merger he had been a Director of HP for 14 years. As a result of his personal ownership 5 6 of HP shares; his relationship to and influence with persons who own or control the voting rights of 7 HP shares; and his positions with and influence with entities that own substantial numbers of HP

8 shares; Hewlett’s negative views regarding the Merger and his opposition to the Merger, had they 9 been disclosed during the Class Period, would have had a significant impact on the marketplace’s 10 judgment, during the Class Period, as to the likelihood of the Merger being consummated. 11 15. At all times relevant hereto Hewlett personally owned or had the sole power to vote 12 13 or to direct the vote of 439,334 shares of HP stock. 14 16. At all times relevant hereto Hewlett was a co-Trustee of the William R. Hewlett

15 Revocable Trust (the “Trust”), which owned 72,802,148 shares of HP stock. At all times relevant 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, hereto Hewlett shared voting authority with respect to those shares with the co-Trustee, Edwin E. 17 van Bronkhorst. Hewlett’s negative views regarding the Merger and his opposition to the Merger 18

SHAPIRO HABER & URMY LLP were, and would have been perceived by the marketplace to be, influential with Mr. van Bronkhorst. 19 20 17. At all times relevant hereto Hewlett was a Director of the Public Policy Institute of

21 California (“PPIC”) which owned 768,520 shares of HP stock. At all times relevant hereto Hewlett

22 shared voting authority over those shares with the other Directors of PPIC. Hewlett’s negative 23 views regarding the Merger and his opposition to the Merger were, and would have been perceived 24 by the marketplace to be, influential with the other Directors of PPIC. 25 18. At all times relevant hereto Hewlett was an Executor of the Estate of William R. 26 27 Hewlett, which owns 1,720,885 shares of HP stock. At all times relevant hereto Hewlett shared

28 voting authority over those shares with the co-Executor of that Estate, Edwin E. van Bronkhorst. As Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 previously noted, Hewlett’s negative views regarding the Merger and his opposition to the Merger

2 were, and would have been perceived by the marketplace to be, influential with Mr. van Bronkhorst. 3 19. At all times relevant hereto Hewlett was the Chairman of and a Director of the 4 William and Flora Hewlett Foundation (the “Hewlett Foundation”), which owned 36,457,840 shares 5 6 of HP common stock. While Hewlett did not have voting authority over those shares, which voting 7 authority was exercised by an independent stock committee, as Chairman and a Director of the

8 Hewlett Foundation, Hewlett’s negative views regarding the Merger and his opposition to the 9 Merger were, and would have been perceived by the marketplace to be, influential with the members 10 of the independent stock committee. 11 20. At all times relevant hereto Hewlett was a Director of the Packard Humanities 12 13 Institute (the “Packard Institute”), which owned 25,760,000 shares of HP common stock. As a 14 Director, Hewlett could have shared voting authority over those shares with the other Directors of

15 the Packard Institute. Hewlett’s negative views regarding the Merger and his opposition to the 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Merger were, and would have been perceived by the marketplace to be, influential with the other 17 Directors of the Packard Institute. 18

SHAPIRO HABER & URMY LLP 21. At all times relevant hereto Hewlett’s sister, Eleanor Hewlett Gimon, owned or had 19 20 the shared power to vote 2,191,800 shares of HP stock. Hewlett’s negative views regarding the

21 Merger and his opposition to the Merger were, and would have been perceived by the marketplace

22 to be, influential with Ms. Gimon. 23 22. At all times relevant hereto Hewlett’s sister, Mary Hewlett Jaffe, owned or had the 24 shared power to vote 4,826,745 shares of HP stock. Hewlett’s negative views regarding the Merger 25 and his opposition to the Merger were, and would have been perceived by the marketplace to be, 26 27 influential with Ms. Jaffe. 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 23. At all times relevant hereto Hewlett’s negative views regarding the Merger, and his

2 opposition to the Merger were, and would also have been perceived by the marketplace to be, 3 significant to and influential with the Trustees of the David and Lucille Packard Foundation (the 4 “Packard Foundation”), which owned approximately 201,300,000 shares (10.4%) of HP common 5 6 stock. (On December 8, 2001, after the end of the Class Period, the Packard Foundation announced 7 its opposition to the Merger and its intention to vote its 201.3 million shares of HP stock against the

8 Merger). 9 24. In light of all of the above-described aspects of Hewlett’s relationship to HP and to 10 persons and entities which owned or controlled the voting power of the hundreds of millions of 11 shares of HP stock detailed above, Hewlett’s negative views regarding the Merger and his 12 13 opposition to the Merger were, and would have been perceived by the marketplace to be, significant 14 to and influential with numerous other institutional and individual holders of HP stock.

15 25. All of the above-described aspects of Hewlett’s relationship to HP and his 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, relationship to and influence with persons and entities which owned or controlled the voting power 17 of hundreds of millions of shares of HP stock, was information that was publicly known, and of 18

SHAPIRO HABER & URMY LLP course, was known to the Defendants, prior to and throughout the Class Period. 19 20 Walter B. Hewlett’s Negative Views Regarding the Merger and His Opposition to the Merger 21 26. Throughout the Class Period, it was known by the Defendants, but it was not known 22 23 by the investing public, including the Plaintiff and the members of the Class, that throughout the 24 period commencing in May, 2001, when the idea of the Merger was first brought to the attention of

25 Hewlett and the other HP Directors, through and including the September 3, 2001 HP Board of 26 Directors meeting at which the Merger was approved, Hewlett had repeatedly and consistently 27 expressed his negative views regarding the Merger and that he was opposed to the Merger. 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 27. Some of the facts regarding Hewlett’s consistent opposition to the Merger and his

2 numerous communications with the Defendants, in which he consistently advised them of his 3 negative views regarding the Merger and his opposition to the Merger, are detailed in a Proxy 4 Statement (Schedule 14A) filed by Hewlett, Edwin E. van Bronkhorst and the William R. Hewlett 5 6 Revocable Trust, with the SEC, on or about February 5, 2002 (the “Hewlett Proxy Statement”). 7 Copies of the relevant pages of the Hewlett Proxy Statement are attached hereto as Exhibit A and

8 are incorporated herein by reference thereto. 9 28. Some of the facts regarding Hewlett’s consistent opposition to the Merger and his 10 numerous communications with the Defendants, in which he consistently advised them of his 11 negative views regarding the Merger and his opposition to the Merger, are detailed in a book entitled 12 13 Backfire, by Peter Burrows, John Wiley & Sons, Inc., 2003. 14 29. Some of the facts regarding Hewlett’s consistent opposition to the Merger and his

15 numerous communications with the Defendants, in which he repeatedly advised them of his negative 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, views regarding the Merger and his opposition to the Merger, are detailed in a book entitled Perfect 17 Enough, by George Anders, Portfolio, 2003. 18

SHAPIRO HABER & URMY LLP 30. Hewlett first became aware that Defendant Fiorina was discussing a merger with 19 20 Compaq when Fiorina so advised him and the other HP Directors at a Hewlett-Packard Board

21 meeting in May, 2001. Hewlett expressed his opposition to such a merger at that meeting. In

22 response to Fiorina’s request that the Board give her permission to continue to discuss a merger with 23 Compaq, Hewlett said: “No, this is not a good idea. It would take us in exactly the wrong 24 direction.” Backfire at 3. 25 31. Thereafter, Hewlett attended meetings of the HP Board, at which the proposed 26 27 Merger was discussed, on May 18, June 24, July 20, August 6, August 25, August 31 and September

28 3, 2001. At those Board meetings, Hewlett repeatedly objected to the proposed Merger. Hewlett Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 discussed his concerns about the proposed Merger with Compaq with Fiorina, the other members of

2 HP’s Board of Directors, and the Board’s advisors. At those meetings, Hewlett expressed his belief 3 that the proposed Merger would permanently destroy shareholder value. He expressed his view that 4 HP should not merge with Compaq because that Merger would dilute HP’s stockholders’ ownership 5 6 in HP’s imaging and printing business and increase HP’s stockholders’ exposure to the commodity 7 personal computer business, which was currently unprofitable for both HP and Compaq. He also

8 expressed his belief that mergers involving computing companies have consistently destroyed 9 shareholder value and that HP should not expose its stockholders to that risk. (Hewlett Proxy 10 Statement at 2). 11 32. Fiorina attended the May 18, June 24, July 20, August 6, August 25, August 31 and 12 13 September 3, 2001 meetings of the Hewlett-Packard Board of Directors, which are described herein. 14 The HP Board of Directors never met concerning the proposed Merger without Fiorina in

15 attendance. 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 33. The Hewlett-Packard Board of Directors held a conference call on July 10, 2001. 17 However, the Defendants failed to inform Hewlett that a conference call was scheduled for July 10, 18

SHAPIRO HABER & URMY LLP 2001. Hewlett had advised the appropriate representatives of the Defendants that he would be at his 19 20 home in Lake Tahoe, where he would be hosting, as he had done annually for several years, an event

21 for about 100 Hewlett-Packard and Agilent employees. Nevertheless, the Defendants only left him a

22 message regarding the July 10, 2001 conference call at his home in Palo Alto, which message he did 23 not receive. The Defendants made no effort to contact him or leave him a message regarding the 24 July 10, 2001 conference call at his home in Lake Tahoe or at his Stanford lab or with the secretary 25 who oversees Bill Hewlett’s office. As Hewlett has said: “They had other numbers, and they never 26 27 tried them.” Since the Defendants did not advise Hewlett of the July 10, 2001 conference call,

28 Hewlett was not a participant in the July 10, 2001 conference call. (Backfire at 180-81). Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 34. The Hewlett-Packard Board of Directors routinely held meetings on a Thursday and

2 Friday in July of each year. In each of the three years prior to July, 2001, Hewlett, due to conflicting 3 commitments, had not attended the Thursday session of that meeting, which typically involved only 4 routine committee work. (Backfire at 181). 5 6 35. The July 2001 meetings of the Hewlett-Packard Board of Directors was scheduled for 7 Thursday and Friday, July 19 and 20, 2001. During the July 10, 2001 conference call, which, as

8 described above, Hewlett was not privy to, Fiorina advised the directors who were participating in 9 the call that the Merger would be the subject of both the July 19 and 20, 2001 Board Meetings. 10 (Backfire at 181). 11 36. The Defendants planned for the proposed Merger with Compaq to be the primary, if 12 13 not the sole, issue to be discussed at the July 19, 2001 Board meeting. That planning was evidenced 14 by the extensive presentations supporting the Merger which were made by the Defendant Fiorina

15 and three consultants from McKinsey & Company, at the July 19, 2001 Board meeting. (Perfect 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Enough at 125-26). 17 37. Since Hewlett was not a participant on the July 10, 2001 conference call, the 18

SHAPIRO HABER & URMY LLP Defendants knew that he had not been advised, in that conference call, that the Merger would be the 19 20 subject of both the July 19 and 20, 2001 Hewlett-Packard Board of Directors Meetings.

21 Nevertheless, the Defendants took no action after the July 10, 2001 conference call to advise

22 Hewlett that the Merger would be the subject of both the July 19 and 20, 2001 Hewlett-Packard 23 Board of Directors Meetings. (Backfire at 181). 24 38. The Defendants knew, or should have known, in light of his past practice as 25 described above, that Hewlett did not plan to attend the Board meeting on Thursday, July 19, 2001, 26 27 and since he had not been told that the Merger would be the subject of the July 19, 2001 Hewlett-

28 Packard Board of Directors Meetings, that he would not be attending the July 19, 2001 meeting. Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 39. Hewlett did not attend the July 19, 2001 Hewlett-Packard Board of Directors

2 meeting because he had not been advised by the Defendants that the Merger would be the subject of 3 that meeting, and accordingly, he believed that the Thursday, July 19, 2001 meeting would involve 4 only routine committee work, as had been the case in previous years. (Perfect Enough at 129). 5 6 40. With respect to the July 19, 2001 Meeting, Hewlett said: “If I had known what an 7 important board meeting this was, of course I would have been there.” “They never told me.”

8 Hewlett has questioned whether the other directors had deliberately kept him in the dark about the 9 importance of the July 19, 2001 Meeting. (Perfect Enough at 129). 10 41. With respect to the July 19, 2001 Meeting, Hewlett also said: “No one made any 11 attempt to say, ‘You’ve got to be there. This will be a critical day.’” Hewlett began to suspect that 12 13 the board was trying to marginalize his influence. (Backfire at 3). 14 42. On July 19, 2001, during formal and informal meetings, the Hewlett-Packard

15 Directors heard presentations regarding the Merger from Fiorina and McKinsey & Company, and 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, discussed the Merger. At that time, the directors understood that Hewlett was opposed to the 17 Merger, in light of his previous consistently negative statements regarding the Merger, since the idea 18

SHAPIRO HABER & URMY LLP had first surfaced in the spring of 2001. 19 20 43. Hewlett attended the July 20, 2001 meeting of the Hewlett-Packard Board of

21 Directors, during which there were discussions regarding the Merger. At that meeting, Hewlett

22 clearly stated his opposition to the Merger. He said: “We really need to think this through.” “I 23 don’t think this is the right choice.” Hewlett also indicated that the Merger failed all the tests that 24 mattered to him, including that it would mean that HP would have a much bigger involvement in 25 PCs, a highly problematic industry, and that the cultural clash caused by combining genteel HP with 26 27 the scrappier culture of Compaq would be disastrous for employees and ultimately bad for

28 shareholders. (Perfect Enough at 128). Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 44. In a conversation on July 20, 2001, with Richard Hackborn, another Hewlett-Packard

2 director, Hewlett reiterated his opposition to the Merger, telling Hackborn that the Merger was “a 3 terrible idea.” Hewlett also told Hackborn: “We’re acting like we’re in a crisis and we’re not.” “It 4 sounds like a bad idea. There’s no way I could go to the Hewlett Foundation and recommend it.” 5 6 (Perfect Enough at 129). 7 45. On July 20, 2001, Hackborn told Fiorina that Hewlett had told him that he could not

8 recommend the Merger to the Hewlett Foundation. (Perfect Enough at 129). 9 46. On July 20, 2001, Fiorina informed Hewlett that Hackborn had conveyed to her 10 Hewlett’s statement to Hackborn that Hewlett could not recommend the Merger to the Hewlett 11 Foundation. (Perfect Enough at 129 - 130). 12 13 47. In a conversation on July 20, 2001, with Jay Keyworth, another Hewlett-Packard 14 director, Keyworth tried to persuade Hewlett to support the Merger, but Hewlett reiterated his

15 opposition to the Merger. In that conversation: 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Hewlett said: “What’s the crisis here, Jay?” 17 Keyworth responded: “I don’t think there’s a crisis, Walter. But we 18 have a big problem, and we need to fix it. Now it’s time to close

SHAPIRO HABER & URMY LLP ranks, Walter. You’ve had your say. We have to pull together.” 19

20 Hewlett unambiguously rejected that suggestion and reiterated his opposition to the Merger, saying: “No, Jay, I think this is the wrong 21 thing to do. I think it’s an incredibly bad idea.”

22 (Backfire at 182). 23 48. During the July 20, 2001 meeting, Hewlett was the only Hewlett-Packard Director to 24 express opposition to the Merger. The Board, over Hewlett’s objections, voted to retain Goldman 25 Sachs as Hewlett-Packard’s investment advisor in connection with the Merger. 26 27 49. During the August 25, 2001 HP Board of Directors meeting, Hewlett explained in

28 detail the numerous reasons why he was opposed to the proposed Merger. He explained that buying Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 Compaq would make HP so big that it could not possibly match the double-digit growth rates it had

2 enjoyed over the decades - and investors don’t pay a lot for slow-growing behemoths. He also 3 expressed his fear that the deal would put a stake into the unique corporate culture “Bill and Dave” 4 had nurtured over the years. The famous “HP Way” was built on teamwork and a tight social 5 6 contract between management and employees. But this deal threatened to sever that bond with at 7 least 15,000 layoffs and subject HP’s communal ethos to Houston-based Compaq’s far more

8 confrontational, cutthroat ways. Hewlett also observed that so much had to go right for the deal to 9 be successful. He questioned what would be the result if antitrust regulators forced HP to sell off 10 businesses to prevent it from monopolizing certain markets? And he questioned what would be the 11 consequences if competitors such as Dell or IBM stole more business than the board expected while 12 13 Hewlett-Packard and Compaq focused on merging their operations? Hewlett said: “If everything 14 doesn’t go exactly right, this won’t be the deal you think it will.” “I beg you to reconsider. Please

15 don’t do this.” (Backfire at 4). 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 50. While some of the other Hewlett-Packard Directors did not respect Hewlett’s 17 opposition to the Merger, and were frustrated by it, the fact that Hewlett was opposed to the Merger 18

SHAPIRO HABER & URMY LLP was utterly unambiguous. This is reflected in Keyworth’s description of the situation: “He reminds 19 20 me of a medieval crusader, he was so self-righteous. It was blatantly obvious to everyone that

21 Walter did not and never had acknowledged the need for a fix.” (Backfire at 183).

22 51. Hewlett-Packard’s primary attorney regarding the Merger was Larry Sonsini 23 (“Sonsini”), a partner in the law firm Wilson Sonsini Goodrich & Rosati PC (“Wilson Sonsini”). It 24 was clear to Larry Sonsini, who was present at the HP Board of Directors meetings, that Hewlett 25 was opposed to the Merger. Sonsini said: “It was becoming clear that Walter [Hewlett] was 26 27 troubled by the deal.” (Perfect Enough at 134). 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 52. Despite Hewlett’s vocal opposition to the Merger, Fiorina and the rest of the HP

2 Board continued to pursue the proposed Merger, which culminated in HP Board of Directors 3 meetings on August 31 and September 3, 2001. At those meetings, Hewlett continued to express his 4 opposition to the Merger and his view that the Merger was not the appropriate course for HP. 5 6 (Hewlett Proxy Statement at 3). 7 53. At the August 31, 2001 HP Board meeting, Sonsini and Marty Korman, another

8 Wilson Sonsini partner, informed the HP Directors that the Merger agreement would require the 9 unanimous approval of the HP Directors. 10 54. At the August 31, 2001 HP Board meeting Korman observed that the reasons to have 11 unanimous board of directors approval of the Merger were “obvious.” Korman explained that 12 13 everyone knew that the proposed Merger would be controversial because Compaq had been 14 performing so poorly and was seen as a company with a dim future, with its stock at its lowest level

15 in years. Furthermore, Korman observed that no big computer industry merger had ever worked out 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, as well as advertised. Under those circumstances, Korman explained that if the HP Board of 17 Directors was divided regarding the Merger, it would give investors one more reason to worry. 18

SHAPIRO HABER & URMY LLP (Backfire at 7 -8). 19 20 55. At the August 31, 2001 HP Board meeting Sonsini admitted that the reason the

21 Merger agreement would require the unanimous approval of the HP Directors was because the

22 unanimous approval of the Merger by the HP Directors would show Board cohesiveness and 23 would improve the impression the proposed Merger would make on the investment 24 community. Sonsini said that the unanimous approval of the Merger by the HP Directors would 25 help the “optics” of the deal. (Perfect Enough at 134). 26 27 56. When Hewlett learned, at the August 31, 2001 HP Board Meeting, that the

28 Merger agreement would require the unanimous approval of the HP Board, Hewlett said: Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 I understand what you’re trying to do with this unanimity clause, but 2 you know I can’t support this. You all know I’m opposed to the 3 deal. You know my views. Do you realize what an awkward position you’ve put me in? I still don’t know how I’m going to come 4 out on this thing.

5 (Backfire at 8, emphasis added) 6 57. Hewlett also said, regarding the unanimity provision of the Merger agreement: 7 “I’m obviously troubled by the merger. What are you guys doing? Look at the terrible position 8 9 you’re putting me in.” (Perfect Enough at 134). 10 58. The Hewlett Proxy Statement details communications between Hewlett and the

11 Defendants at the critical August 31 and September 3, 2001 HP Board meetings, as follows: 12

13 On Friday, August 31, 2001, just three days before the HP board was asked to vote on the merger agreement, at an HP board 14 meeting, Larry Sonsini, HP’s outside legal counsel, informed the HP board that the merger agreement being presented to the board required 15 unanimous approval by the HP board. Mr. Hewlett then made clear to

53 State Street the entire board that the unanimous vote requirement put him in a very (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, difficult position, as he was not persuaded that the proposed merger 17 was in the best interests of HP or its stockholders. At this point in time, Mr. Hewlett understood that the only major open issue was the 18 exchange ratio (that is, the price HP would pay for Compaq). SHAPIRO HABER & URMY LLP 19 Additionally, all of the directors were told that HP and Compaq were still vigorously negotiating over the exchange ratio. 20 Mr. Sonsini then asked to speak with Mr. Hewlett outside the 21 presence of the rest of the board members. During this discussion, Mr. Sonsini informed Mr. Hewlett that HP was going to proceed with 22 the proposed merger whether or not Mr. Hewlett voted in favor of it as 23 a director. Mr. Hewlett then asked Mr. Sonsini whether he could abstain from the director vote. Mr. Sonsini advised Mr. Hewlett that 24 he could not abstain under the existing terms of the merger agreement. Mr. Sonsini also advised Mr. Hewlett that, even if he voted to approve 25 the proposed merger as a board member, he could still vote against it 26 as a stockholder. Mr. Hewlett knew that if he voted against the proposed merger as a director, the provision stating that the HP board 27 had unanimously approved the proposed merger would have to be revised. Given Mr. Hewlett’s understanding that the exchange ratio 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 was the only significant open issue and that HP and Compaq were vigorously negotiating over the exchange ratio, and in light of Mr. 2 Hewlett’s conversation with Mr. Sonsini, Mr. Hewlett believed that if 3 he voted against the proposed merger as a director, HP would have to pay a higher price for Compaq. Since, based on his conversation with 4 Mr. Sonsini, Mr. Hewlett believed the proposed merger was certain to be approved by the board without his vote and because he believed it 5 was in the best interests of HP stockholders to negotiate the best 6 possible price for Compaq if the proposed merger were to be submitted to a stockholder vote, Mr. Hewlett determined to vote for 7 the proposed transaction as a director and give stockholders the opportunity to make their own decision. 8 On Monday, September 3, 2001, during the telephone call 9 in which the proposed merger was approved by the HP board, 10 Mr. Hewlett informed the board that he might not support the proposed merger as a stockholder, and that, if the vote were to occur 11 that day, he would vote against the proposed merger as a stockholder. Mr. Hewlett intended to oppose the proposed merger 12 as a stockholder at that time due to his concerns as described 13 above.

14 (Hewlett Proxy Statement at 3, emphasis added).

15 59. From the time he first heard about the proposed Merger with Compaq in May, 2001, 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Hewlett’s opposition to the Merger was focused on his belief that the Merger would permanently 17 destroy HP stockholder value. (Hewlett Proxy Statement at 2). 18

SHAPIRO HABER & URMY LLP 60. Even though, at the September 3, 2001 meeting, Hewlett had finally, grudgingly, said 19 20 that he was “voting for this as a director,” Hewlett was, in fact, still opposed to the Merger, for all of

21 the reasons he had expressed to the Defendants and the other members of the HP Board of Directors

22 throughout the period from when he first heard about the proposed Merger with Compaq in May, 23 2001, through and including the conclusion of the September 3, 2001 HP Board of Directors 24 meeting. 25 61. In light of all of the facts detailed above and the facts disclosed and described in the 26 27 Hewlett Proxy Statement which demonstrate Hewlett’s consistent opposition to the Merger since he

28 first heard about it in May, 2001, and his numerous communications with the Defendants from May, Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 2001 through and including September 3, 2001, in which he repeatedly advised the Defendants of

2 his negative views regarding the Merger and his opposition to the Merger, at the conclusion of the 3 September 3, 2001 Board Meeting the Defendants knew that even though Hewlett had finally, 4 grudgingly, said that he was “voting for this as a director,” Hewlett was, in fact, still opposed to the 5 6 Merger for all of the reasons he had expressed to the Defendants and the other members of the HP 7 Board of Directors throughout the period from when he first heard about the proposed Merger with

8 Compaq in May, 2001, through and including the conclusion of the September 3, 2001 HP Board of 9 Directors meeting. 10 62. All of the facts detailed above and all of the facts disclosed and described in the 11 Hewlett Proxy Statement regarding Hewlett’s negative views regarding the Merger and his 12 13 opposition to the Merger are hereinafter collectively referred to as the “Omitted Material Facts.” 14

15 The Defendants’ Public Statements and Filings Regarding the Merger On September 3, 2001 and Throughout the Class Period 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 63. On September 3, 2001, HP and Compaq issued a press release announcing that HP 18

SHAPIRO HABER & URMY LLP and Compaq had agreed to merge (hereinafter the “September 3, 2001 Press Release”). The 19 20 September 3, 2001 Press Release stated, inter alia, that the Merger agreement had been

21 “...unanimously approved by both Boards of Directors....” A copy of the September 3, 2001 Press

22 Release is attached hereto as Exhibit B and it is incorporated herein in full by reference. 23 64. On September 4, 2001, Hewlett-Packard filed a Form 8-K with the SEC regarding the 24 Merger (the “September 4, 2001 8-K”). Hewlett-Packard filed the September 3, 2001 Press Release 25 as an exhibit to that Form 8-K. 26 27 65. Hewlett-Packard also filed, as an exhibit to the September 4, 2001 8-K, the Merger

28 Agreement between Hewlett-Packard and Compaq, which Merger Agreement stated: Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 3.15 BOARD APPROVAL. The Board of Directors of HP has, by resolutions duly adopted by unanimous vote at a meeting of all 2 Directors duly called and held and not subsequently rescinded or 3 modified in any way (the “HP BOARD APPROVAL”) has duly (i) determined that the Merger is fair to, and in the best interests of, HP 4 and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement, and (iii) recommended that the stockholders 5 of HP approve the Stock Issuance and directed that such matter be 6 submitted to HP’s stockholders at the HP Stockholders’ Meeting.

7 66. On September 4, 2001, commencing at 9:00 a.m., the Defendants, along with

8 Compaq and Michael Capellas, Compaq’s Chairman and Chief Executive Officer, and others 9 speaking on behalf of HP, held a meeting for the investment community, at which Defendants and 10 others discussed numerous aspects of the Merger and answered questions from members of the 11 investment community regarding the Merger. 12 13 67. Thereafter, on September 4, 2001, at approximately 11 a.m. EDT, Defendants and 14 others held a question and answer session for the public media regarding the Merger. During that

15 session, Capellas made the following statement: 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, We absolutely took very hard questions of ourselves because that is 17 the rational question when you start to say, okay, this is really going to happen. Now, are you doing it – does this make as much [sense] in 18 really good times as it does now? And I think both myself and our

SHAPIRO HABER & URMY LLP board, both boards, the management team said, absolutely this 19 makes strategic sense. And so that’s it.... (emphasis added) 20 68. Both the 9 am and 11 am meetings on September 4, 2001, were accessible to the 21 investing public by telephone call-in, as well as via audiocast through both HP and Compaq’s web 22 23 sites. The transcript of those meetings was also posted on HP and Compaq’s web sites and was filed 24 by HP with the Securities and Exchange Commission (“SEC”). A copy of that transcript is attached

25 hereto as Exhibit C and it is incorporated herein in full by reference. 26 27 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 69. Each of the Defendants’ public statements and SEC filings on September 3 and 4,

2 2001, described in the six preceding paragraphs were materially misleading because of the 3 Defendants’ failure to disclose the Omitted Material Facts. 4 70. During the Class Period the Defendants made numerous public statements and SEC 5 6 filings regarding the Merger, in which the Defendants articulated numerous reasons why the Merger 7 was advantageous to Hewlett-Packard, and its employees and shareholders, and why the opponents

8 of the Merger were incorrect. Each of those public statements and SEC filings were materially 9 misleading because of the Defendants’ failure to disclose the Omitted Material Facts. 10 71. The materially misleading filings by the Defendants with the SEC included: 11 a. September 4, 2001 Rule 425 filing containing an article discussing the 12 13 merger, which was posted on HP’s internal website on September 3, 2001, in 14 which the Defendants said: “The board of directors of both Hewlett-Packard

15 and Compaq unanimously approved the terms of the agreement.” 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, b. September 4, 2001 Rule 425 filing containing a email sent by Fiorina 17 to all Hewlett-Packard employees. In that filing Fiorina said, inter alia: “Our 18

SHAPIRO HABER & URMY LLP competitors are going to use every chance they can to discredit [the Merger]: 19 20 They’ll say we’ll lose focus, they’ll say we won’t be able to execute, they’ll

21 say we won’t be able to make the rough decisions fast enough. I believe we

22 will prove them wrong.” 23 c. September 4, 2001 Rule 425 filing containing a letter from Fiorina to 24 Hewlett-Packard customers regarding the Merger. The letter had been posted 25 on HP’ website on September 4, 2001. 26 27 d. September 20, 2001 Rule 425 filing containing a transcript of a taped message

28 recorded by and sent by Fiorina to all Hewlett-Packard employees. In that Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 filing Fiorina said, inter alia: “...candidly, we expected the market reaction to

2 this deal to be tough....it’s fair to say that while we knew the reaction would 3 be tough, we didn’t think it would be quite this tough....We are fighting 4 against a prejudice with a risk-adverse set of people who are saying, ‘I’m not 5 6 sure I know this is going to work.’” 7 e. September 25, 2001 Rule 425 filing containing a transcript of a speech by

8 Fiorina on September 17, 2001 before the IBC European IT Forum, in which 9 Fiorina said, inter alia: “Trust me, this [Compaq and HP management] team 10 is determined and motivated to prove the skeptics around this combination [of 11 HP and Compaq] wrong.” 12 13 f. October 9, 2001 Rule 425 filing containing a HP position paper regarding the 14 Merger, which was presented by HP at the Gartner Symposium ITxpo 2001

15 during the week of October 8, 2001. 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, g. October 16, 2001 Rule 425 filing containing a message from Fiorina, in 17 which she announced “personnel appointments for the merged company.” 18

SHAPIRO HABER & URMY LLP h. October 25, 2001 Rule 425 filing containing a series of slides relating to the 19 20 Merger that were “...being presented and discussed in greater detail during

21 meetings between representatives of HP and HP investors.”

22 72. All of the SEC filings described in the preceding paragraph are incorporated herein in 23 full by reference. Each of those public statements and SEC filings were materially misleading 24 because of the Defendants’ failure to disclose the Omitted Material Facts. 25 73. On or about September 18, 2001, Fiorina, in explaining to The Wall Street Journal 26 27 why the critics of the Merger were wrong, said: “[v]olumes have been written about the

28 combination, much of it focused on PC market consolidation or creating scale to cut costs. But Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 those stories, frankly, miss the point.” Molly Williams & Gary McWilliams, H-P, Compaq Refocus

2 on Combination, The Wall Street Journal, September 19, 2001, at B6. 3 74. In an October 9, 2001, Financial Times article, Fiorina admitted that “she had 4 expected some sort of immediate hostile reaction to the deal. ‘I told both boards the market would 5 6 hate this deal initially. But I think we underestimated the impact of how big a surprise this was’ she 7 [said].” Paul Abrahams, Companies & Finance the Americas: Fiorina Struggles for Survival as

8 Value of HP Deteriorates: Dubbed the Most Powerful Woman in Business, the HP Chief Executive 9 Faces a Daunting Task, Financial Times, October 9, 2001. In that article Fiorina also discussed the 10 shareholder vote regarding the Merger. She said: “[t]his deal is very tight. Only shareholders can 11 vote down this deal.” The Financial Times, which, as the rest of the public, did not know about 12 13 Hewlett’s opposition to the Merger or the other Omitted Material Facts, concluded: “If it [the 14 Merger] does reach a shareholder vote, the transaction is likely to pass, not least because “the

15 majority of those who oppose it will have voted with their feet and sold their shares. The danger is 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, that so many sell that the shares continue to fall.” 17 75. On October 16, 2001, in response to a public letter by Matrix Asset Advisors, a large 18

SHAPIRO HABER & URMY LLP HP shareholder, to HP and Fiorina expressing Matrix’s opposition to the Merger, a spokesperson for 19 20 HP stated that “the company has been ‘hearing from investors, both positive and negative’

21 concerning the transactions.’” Molly Williams, Matrix Urges Hewlett, Compaq to Abandon

22 Planned Merger, The Wall Street Journal, October 16, 2001. 23 76. The Defendants’ statements to the media regarding the Merger, described in the three 24 preceding paragraphs, were materially misleading because of the Defendants’ failure to disclose the 25 Omitted Material Facts. 26 27

28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 The Stock Market Responded Negatively to the Proposed Merger

2 77. The stock market responded negatively to the proposed Merger. The price of HP 3 stock had closed on August 31, 2001, the last trading day prior to the September 3, 2001 4 announcement of the Merger, at $23.21 per share. The trading volume on that day was just over 5 5 6 million shares. On September 4, 2001, the price of HP common stock opened at $21.15 per share, 7 traded as low at $18.75 per share and closed at $18.87 per share, down $4.34 per share (18.7%) from

8 its pre-merger announcement close on August 31, 2001. Over 37 million shares of HP common 9 stock traded on September 4, 2001. The price of HP common stock declined on September 4, 2001, 10 as described above, because of the market’s unfavorable reaction to the Merger, coupled with its 11 judgment, based upon the publicly available information, as to likelihood that the Merger would be 12 13 consummated. 14 78. On September 5, 2001, the price of HP common stock traded as low as $17.00 per

15 share and closed at $18.21 per share, a decline of $.66 from its close on September 4, 2001. Almost 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 40 million shares of HP common stock were traded on September 5, 2001. The decline in the price 17 of HP common stock on that day was, again, caused by the stock market’s unfavorable reaction to 18

SHAPIRO HABER & URMY LLP the Merger, coupled with its judgment, based upon the publicly available information, as to the 19 20 likelihood that the Merger would be consummated.

21 79. On September 6, 2001, the price of HP common stock again declined. It traded as

22 low as $17.20 per share and closed at $17.70 per share, a decline of an additional $.51 per share 23 from the close on September 5, 2001. More than 18.5 million shares of HP common stock were 24 traded on September 6, 2001. The decline in the price of HP stock on September 6, 2001 was, 25 again, caused by the stock market’s unfavorable reaction to the Merger, coupled with its judgment, 26 27 based upon the publicly available information, as to the likelihood that the Merger would be

28 consummated. Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 80. Over the first three trading days after the Defendants’ September 3, 2001

2 announcement of the Merger, which were September 4, 5 and 6, 2001, the market price of Hewlett- 3 Packard common stock declined a total of $5.51 per share, which constituted a decline of 23.74% 4 from the closing price of HP common stock of $23.21 per share on August 31, 2001, the last day of 5 6 trading before the Merger announcement. The decline in the price of HP stock on September 4, 5 7 and 6, 2001 was caused by the stock market’s unfavorable reaction to the Merger, coupled with its

8 judgment, based upon the publicly available information, as to the likelihood that the Merger would 9 be consummated. 10 81. Consistent with that negative reaction reflected by the decline in the price of Hewlett- 11 Packard stock were numerous derisive statements about the Merger in the media. The reaction has 12 13 been described as “a tide of scorn,” with investors competing for the best insulting metaphor to 14 describe the deal. “It’s like taking two stones and tying them together to see if they float,” said one.

15 Others talked about two drunks trying to hold each other up, or how the deal was a cross between a 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, turkey and an albatross. Rivals seemed especially happy for the newlyweds. “The visual I see is a 17 slow-motion collision of two garbage trucks,” Sun Microsystems’ Scott McNealy would quip. 18

SHAPIRO HABER & URMY LLP (Backfire at 186). 19 20 82. As detailed below, market commentators and analysts alike emphasized both their,

21 and the market’s, unfavorable reaction to the Merger. Significantly, the reasons articulated by the

22 market commentators and analysts for their negative view of the Merger were (unbeknownst to 23 them) the very reasons that Hewlett had repeatedly explained to the HP Board and Fiorina as the 24 basis for his opposition to the Merger. 25 83. In the Wall Street Journal’s September 4, 2001 article reporting the Merger 26 27 announcement, it said: 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 Hewlett-Packard is likely to get some tough questions from Wall Street. Its credibility is already shaky, and becoming the world’s 2 biggest maker of PC’s at a time when the personal-computer market is 3 suffering would probably prompt some analysts to scratch their heads…. 4 84. In an article dated September 5, 2001, The Wall Street Journal reported that a 5 6 portfolio manager for Banc One Corp., which owned 8.5 million shares of HP, was “doubtful that 7 there are any benefits to the deal. ‘All you are creating is a bigger company that isn’t credibly

8 positioned. . . . Merging the two together doesn’t accelerate growth at either one.” The same article 9 quoted another analyst as saying: “Two losers don’t make a winner.” 10 85. In a September 6, 2001 report, Credit Suisse First Boston analysts said: “The equity 11 markets clearly disliked this merger, pushing both HP and CPQ to new 52-week lows, driving the 12 13 value of the merger down to approximately $18.8 billion from the originally announced $25 billion. 14 Indeed, HWP essentially doubled down in the PC segment, the worst place to be in the

15 computer and peripherals sector right now.” Mark R. Altherr & Nicolle P. Hanneman, High 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Grade Trading Daily, Credit Suisse First Boston, September 6, 2001, emphasis added. 17 86. An article in the September 6, 2001 Wall Street Journal observed that “clearly the 18

SHAPIRO HABER & URMY LLP biggest threat to the deal this week is investor sentiment. That is why H-P and Compaq started this 19 20 full-court press to win the hearts and minds on Wall Street and among shareholders.” The

21 Defendants did not disclose the Omitted Material Facts because doing so would have been contrary

22 to their effort to “win the hearts and minds” of Wall Street and HP shareholders. The article also 23 discussed concerns raised by analysts as to whether Fiorina and HP could meld the two distinct 24 corporate cultures. Highlighting the concern, analyst Ashok Kumar of US Bancorp Piper Jaffrey 25 “spoke with three top H-P executives who are dismayed by the deal. Without total support 26 27 internally . . . the integration will be next to impossible.” Molly Williams & Bridget O’Brien, H-P’s 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 Task is to Sell Its Deal to Skeptics – CEO Woos Big Investors as Shares of PC Maker and Compaq

2 Fall Again, The Wall Street Journal, September 6, 2001, at A3. 3 87. Significantly, many of the analysts and portfolio managers who were expressing 4 opposition to the Merger, did so (unbeknownst to them) for the same reasons that Hewlett had 5 6 repeatedly expressed to the Defendants. For example, the September 6, 2001 Wall Street Journal 7 article reported one portfolio manager expressing opposition to the Merger because it is “poorly

8 conceived, the timing is terrible and the new company won’t be as competitive as the executives 9 predict.” The article reports that an analyst viewing the Merger as “wrongheaded” because “the 10 value of H-P’s imaging business is diluted by the Compaq deal...” Another portfolio manager said: 11 “They’re adding to their exposure in the low-end commodity products...really kind of a junky 12 13 business.” 14 88. In a September 7, 2001 report, analysts from A.G. Edwards expressed concerns with

15 merger integration and profitability in the PC sector and said: “We believe that the expectations put 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, forth by the company were a ‘best-case’ scenario for the merger.” Shebly Seyrafi & Aaron Rakers, 17 HP/Compaq – the Mother of All Intergration Challenges, A.G. Edwards & Sons, Inc., September 7, 18

SHAPIRO HABER & URMY LLP 2001, at *3. 19 20 89. The September 10, 2001 issue of Barrons’s reported as follows:

21 We called out Carly Fiorina and dared her to exit the unprofitable personal-computer business, but lo and behold the 22 Hewlett-Packard Chief Executive opted to ignore our advice by 23 doubling down on her company’s commitment to PC’s with its bid to buy rival Compaq Computer. 24 * * * 25 The early returns on the combination are not favorable…HP 26 has lost $10.6 billion, or 23% of its market value, since Monday’s 27 announcement, and Compaq’s market value has slipped $3.3 billion. The problem: This is a marriage of weakness, with two money- 28 losing computer-makers running into each other’s arms at a time Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 of dire desperation and imploding income statements.” Mark Veverka, Carly Gets Radical: HP’s merger with Compaq is a bold 2 move; But profitable? That’s a different question, Barron’s, 3 September 10, 2001, emphasis added.

4 90. Similarly, on September 10, 2001, the Wall Street Journal reported: “Critics say the

5 stock drop laid bare the holes in each company’s strategy and betrayed a gross miscalculation. Both 6 companies had been promising to emphasize higher-profit-margin services to counter the downturn 7 in computer profits. Instead, the combination would boost the resulting company’s reliance on 8 lower-profit-margin, slower-growing hardware such as personal computers.” Gary McWilliams & 9 10 Molly Williams, H-P, Compaq Blanket Investors with Merits of Planned Deal, The Wall Street

11 Journal, September 10, 2001.

12 91. The article in the September 17, 2001 issue of Business Week was evening harsher. 13 It reported: “Shares of both companies collapsed after the Labor Day announcement. With HP 14 shares plummeting 21.5% and Compaq tanking 15.7%, together the pair lost $13 billion in market 15 capitalization in just two days, raising questions of whether the deal can proceed. ‘It’s like taking 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 two stones and tying them together to see if they float,’ [said] one large institutional investor.”

18 Peter Burrows, Andrew Park & Geoffrey Smith, Where’s the Upside? HP-Compaq will lead in PCs SHAPIRO HABER & URMY LLP 19 – but not in costs or technology, BusinessWeek, September 17, 2001, at 40, emphasis added. 20 92. The coverage of the Merger in the October 1, 2001 issue of Forbes was even 21 sarcastic. It said: “Carly Fiorina has a simple reason she wants to spend $19 billion in Hewlett- 22 23 Packard stock to buy Compaq. ‘It’s all about delivering value to customers and shareholders,’ the 24 HP chief told analysts after she announced the deal. Three days later HP had lost $10.7 billion in

25 shareholder value. Oops.” Quentin Hardy, Performance Anxiety; Hardware Wall Street jeered at 26 HP-Compaq deal. No surprise given the record of big deals, Forbes Magazine, October 1, 2001, at 27 52, emphasis added. 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 93. Similarly, an article in the October 5, 2001 issue of Barron’s describes another analyst’s

2 perspective on the Merger, as follows: 3 Considering that HP’s printing and imaging business accounts for 4 more than 100% operating profit, the impact of that cash cow on the merged company’s bottom line will be diminished, Sacconaghi notes. 5 He says printing and imaging accounts for about 43% of HP’s 6 revenues prior to a merger, but only about 20% after. Thus, HP shareholders see the value of their stock diluted as Compaq adds little 7 or no value to their investments.

8 94. The strong negative sentiment regarding the merger continued throughout the Class 9 10 Period. For example, as reported in the October 16, 2001 New York Times, Matrix Asset Advisors,

11 which owned 531,000 shares of Hewlett-Packard and 826,000 shares of Compaq, wrote the Boards

12 of Directors of both companies, asking them to abandon the Merger. The letter observed the drop in 13 the share price of both companies since the Merger was announced and that rivals were gearing up 14 to take customers from them – that “competitors like Dell Computer and Sun Microsystems have 15 shown ‘unbridled enthusiasm’ for the combination.” The letter said that: “Hewlett-Packard and 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 Compaq would fare better alone, without the ‘morale-destroying’ layoffs that would come from

18 integrating the companies.” SHAPIRO HABER & URMY LLP 19 95. On October 23, 2001, Fiorina and Robert Wayman, the Chief Financial Officer of 20 HP, met with analysts from Sanford C. Bernstein & Co. The Defendants did not disclose the 21 Omitted Material Facts to those analysts at that meeting. In an October 24, 2001 analyst report in 22 23 Bernstein Research Call, which reported on the October 23, 2001 meeting with Fiorina and 24 Wayman, the Bernstein analysts demonstrated the degree to which the market price of Hewlett-

25 Packard was influenced by the market’s negative view of the Merger and its judgment as to the 26 likelihood of the Merger being consummated. The report said: “…we do think that there remains a 27 material chance that the deal will be defeated by shareholders, which could also provide a pop to 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 [Hewlett-Packard] stock, given that many investors believe, as we do, that HWP [Hewlett-Packard]

2 alone is worth $20 - $25/share.” 3 96. The October 24, 2001 Bernstein report also demonstrated the degree to which the 4 Bernstein analysts and the marketplace were being misled by the Defendants’ failure to disclose the 5 6 Omitted Material Facts. The report reflected the analysts’ belief (and the understanding of the 7 market) that the likelihood of the Merger being approved by the shareholders of Hewlett-Packard

8 was greater because they (erroneously) believed that Hewlett supported the Merger and would be 9 voting his shares in favor of the Merger. The report said: “We …believe that HWP realizes it will 10 need to continue to aggressively sell the deal to make sure shareholders do approve it. We continue 11 to believe that CPQ [Compaq] shareholder approval is likely, while HWP approval (although the 12 13 Hewlett and Packard families control about 15% of the vote) may be a more difficult sell.” In other 14 words, the Bernstein analysts were judging the likelihood of the Merger being approved by Hewlett-

15 Packard shareholders based upon the fact that the founders’ families controlled about 15% of the 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, vote and the analysts’ assumption (since they did not know the Material Omitted Facts) that those 17 families, including Hewlett, would be voting their shares in favor of the Merger. 18

SHAPIRO HABER & URMY LLP 97. In the October 29, 2001 issue of Fortune, its technology analysts recommended the 19 20 sale of both HP and Compaq stock, because of the Merger. They reported opposition to the Merger

21 as follows:

22 Few are buying it [the Merger]. Since the deal was announced, each 23 stock has lost about a third of its value. Why? First, what the deal essentially does is increase HP’s exposure to the low-margin, high 24 competition, dwindling demand PC industry (the new entity would reclaim the No. 1 spot from Dell). “This seems like the wrong battle 25 to fight,” writes Merrill Lynch analyst Kraemer.

26 * * * 27 The bottom line for investors? There’s a great risk that 28 whatever can go wrong with this messy combination, will....Explains Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 one tech fund manager who is shunning both stocks: “If the don’t do this right, you don’t want to be anywhere near this puppy.” 2 3 98. The Defendants, purposely and with the intent to deceive, failed to disclose the

4 Omitted Material Facts throughout the Class Period in order to avoid the effect which the disclosure 5 of the Omitted Material Facts would have had – i.e. the reinforcement and expansion of the 6 marketplace’s opposition to the Merger. 7 99. Throughout the Class Period, the price of HP common stock remained depressed 8 9 because of the stock market’s unfavorable reaction to the Merger, coupled with its judgment, based 10 upon the publicly available information, as to the likelihood that the Merger would be consummated.

11 100. At the close of trading on November 5, 2001, the last day of the Class Period, HP 12 common stock closed at $16.89 per share. The price of HP common stock had declined $6.32 per 13 share during the Class Period due to the stock market’s unfavorable reaction to the Merger, coupled 14 with its judgment, based upon the publicly available information, as to the likelihood that the 15

53 State Street Merger would be consummated. That decline in the price of HP stock during the Class Period (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 constituted a decline of 27.2% from the closing price on August 31, 2001, the last trading day prior

18 to the beginning of the Class Period. SHAPIRO HABER & URMY LLP 19 101. The fact that the 27.2% decline in HP stock’s price during the Class Period was 20 attributable to the stock market’s negative reaction to the Merger, and its assessment of the 21 likelihood that the Merger would be consummated, is demonstrated by an index of the stock prices 22 23 of eleven companies comparable to HP, consisting of Accenture Ltd., Apple Computer, Inc.,

24 Computer Sciences Corporation, Dell Computer Corporation, Electronic Data Systems Corporation,

25 EMC Corporation, Gateway, Inc., International Business Machines Corporation, KPMG 26 International, Network Appliance, Inc., and Sun Microsystems, Inc. (the “Selected Companies”). 27 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 That index of the stock prices of the Selected Companies increased 9.9% during the Class Period,

2 while, as previously noted, HP’s stock price declined 27.2% during the same period. 3 102. Goldman Sachs was the financial advisor to Hewlett-Packard in connection with the 4 Merger. The Selected Companies are the same companies selected by Goldman Sachs in 5 6 performing its Selected Companies Analysis for Hewlett-Packard in connection with the Merger. 7 The Defendants described in detail, and relied upon, the Goldman Sachs Selected Companies

8 Analysis in the Joint Proxy Statement/Registration Statement filed by Hewlett-Packard with the 9 SEC on November 15, 2001. 10

11 The Defendants’ Omission of the Omitted Material Facts Caused The September 3, 2001 Press 12 Release and the Defendants’ Other Statements and Filings Regarding the Merger During the 13 Class Period to be Deceptive and Misleading.

14 103. All of the Omitted Material Facts constituted information which a reasonable

15 investor, making an investment decision as to whether to buy or sell Hewlett-Packard common stock 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, during the Class Period, would have wanted to know, before making that investment decision. 17 104. All of the Omitted Material Facts constituted information that would have affected 18

SHAPIRO HABER & URMY LLP the total mix of information available to the investing public during the Class Period, about Hewlett- 19 20 Packard, the Merger and the likelihood of the Merger being consummated.

21 105. All of the Omitted Material Facts were known to the Defendants when they issued

22 the September 3, 2001 Press Release and were known to the Defendants throughout the Class 23 Period. 24 106. The Defendants had a duty to disclose the Omitted Material Facts when they issued 25 the September 3, 2001 Press Release because disclosure of the Omitted Material Facts was 26 27 necessary in order to make the September 3, 2001 Press Release and in particular the portion of the

28 September 3, 2001 Press Release which stated that the Merger agreement had been “...unanimously Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 approved by both Boards of Directors....” in light of the circumstances under which they were made,

2 not misleading. The Defendants’ issuance of the September 3, 2001 Press Release, without 3 disclosing the Omitted Material Facts, caused the September 3, 2001 Press Release to deceive and 4 mislead the investing public as to Hewlett’s position and views regarding the Merger and as to the 5 6 likelihood of the Merger being consummated. 7 107. The Defendants had a duty to disclose the Omitted Material Facts when they filed the

8 Merger Agreement with the SEC as an exhibit to the September 4, 2001 8-K, because disclosure of 9 the Omitted Material Facts was necessary in order to make the September 4, 2001 8-K, and in 10 particular Section 3.15 of the Merger Agreement, quoted above, which stated, inter alia, that “all 11 Directors” of HP had “...determined that the Merger is fair to, and in the best interests of, HP and its 12 13 stockholders and declared the Merger to be advisable, ... and ... recommended that the stockholders 14 of HP approve [the Merger] ....” (Id, emphasis added), in light of the circumstances under which

15 they were made, not misleading. The Defendants’ filing of the September 4, 2001 8-K, with the 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Merger Agreement as an exhibit thereto, without disclosing the Omitted Material Facts, caused the 17 September 4, 2001 8-K, and the Merger Agreement which was an exhibit thereto, to deceive and 18

SHAPIRO HABER & URMY LLP mislead the investing public as to Hewlett’s position and views regarding the Merger and as to the 19 20 likelihood of the Merger being consummated.

21 108. Having issued the September 3, 2001 Press Release and having filed the September

22 4, 2001 8-K, with the Merger Agreement as an exhibit thereto, without disclosing the Omitted 23 Material Facts, the Defendants had the duty to disclose the Omitted Material Facts each time, 24 thereafter, during the Class Period, when they made public statements or SEC filings regarding the 25 Merger, including each of the public statements and SEC filings described above. The Defendants 26 27 had that disclosure duty because, having failed to disclose the Omitted Material Facts in the

28 September 3, 2001 Press Release or in the September 4, 2001 8-K, with the Merger Agreement as an Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 exhibit thereto, disclosure of the Omitted Material Facts was necessary in order to make each of the

2 Defendants’ subsequent public statements and SEC filings during the Class Period regarding the 3 Merger, including each of the public statements and SEC filings described above, in light of the 4 circumstances under which they were made, not misleading. Each of those subsequent public 5 6 statements and filings during the Class Period regarding the Merger including each of the public 7 statements or SEC filings described above deceived and mislead the investing public as to Hewlett’s

8 position and views regarding the Merger and the likelihood of the Merger being consummated. 9 109. The Omitted Material Facts, had they been known by the investing public during the 10 Class Period, would have significantly affected the investing public’s judgment as to the likelihood 11 of the Merger being consummated and, specifically, would have caused the investing public, during 12 13 the Class Period, to have believed that the likelihood of the Merger being consummated was 14 significantly less than the investing public believed to be the case during the Class Period, without

15 knowledge of the Omitted Material Facts. 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 110. As detailed herein, the market price of HP common stock, throughout the Class 17 Period, was substantially and significantly influenced by the investment community’s judgment as 18

SHAPIRO HABER & URMY LLP to the likelihood of the Merger being consummated, with the price of HP common stock moving 19 20 inversely to the investment community’s judgment that the Merger was likely to be consummated.

21 111. Since, as described above, the stock market’s reaction to the proposed Merger was

22 negative, as reflected in the substantial decline in the price of HP stock when the Merger was 23 announced and throughout the Class Period, the Defendants’ failure to disclose the Omitted Material 24 Facts in their public statements and filings during the Class Period caused the price of HP common 25 stock throughout the Class Period to be artificially deflated, or lower than it would have been had 26 27 the Omitted Material Facts been disclosed by the Defendants and publicly known.

28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 Hewlett’s Opposition to the Merger is Publicly Disclosed by Hewlett on 2 November 6, 2001 3 112. On November 6, 2001, Hewlett issued a press release (the “Hewlett Press Release”), 4 a copy of which is attached hereto as Exhibit D and incorporated herein in full by reference. 5 6 113. Through the Hewlett Press Release, the investing public learned, for the first time, 7 that Hewlett was opposed to the Merger and that the shares owned by Hewlett, Hewlett’s sisters

8 (Eleanor Hewlett Gimon and Mary Hewlett Jaffe) and the William R. Hewlett Revocable Trust 9 would be voted against the proposed Merger. The Hewlett Press Release also advised that the 10 William and Flora Hewlett Foundation had reached a preliminary conclusion to vote its HP shares 11 against the Merger. 12 13 114. In the Hewlett Press Release, Hewlett explained some of his reasons for voting 14 against the Merger, including the same reasons Hewlett had previously, as detailed above,

15 repeatedly expressed to the Defendants prior to the Class Period. As stated in the Hewlett Press 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, Release: 17 (a) “The combination would dramatically increase Hewlett-Packard’s exposure to 18

SHAPIRO HABER & URMY LLP the unattractive PC business and dilute current shareholders’ interest in 19 20 Hewlett-Packard’s profitable printer business. Given the lack of stockholder

21 benefits, I believe the extensive integration risks associated with this

22 transaction are not worth taking.” 23 (b) “acquiring Compaq would significantly increase Hewlett-Packard’s exposure 24 to PCs – an area that is neither growing nor profitable”; and 25 (c) “The merger would substantially dilute the current stockholders’ interest in 26 27 Hewlett-Packard’s profitable printer and imaging business.” 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 115. The Hewlett Press Release observed that the combined holdings of Hewlett, his

2 sisters, the Trust and the Hewlett Foundation were more than 100 million HP shares. 3 116. The Hewlett Press Release caused the investing public to reduce significantly its 4 estimation of the likelihood that the Merger would be consummated. Accordingly, since the stock 5 6 market viewed the prospect of the Merger being consummated negatively, the price of HP stock rose 7 substantially on November 6, 2001, in response to the Hewlett Press Release. Specifically, on

8 November 6, 2001, HP common stock closed at $19.81 per share, up $2.92 per share from its $16.89 9 per share close on November 5, 2001, the last day of the Class Period. Almost 35 million shares of 10 HP stock traded on November 6, 2001. Within days of the investing public learning of Hewlett’s 11 opposition to the Merger from the Hewlett Press Release, the price of HP stock traded as high as 12 13 $23.34 per share, slightly higher than the price at which it had closed on August 31, 2001, the last 14 trading day prior to announcement of the Merger and the beginning of the Class Period.

15 117. The fact that the 17.29% increase in HP stock’s price on November 6, 2001 was 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, attributable to the stock market’s positive reaction to Walter Hewlett’s announcement of his 17 opposition to the Merger, and its resulting downward reassessment of the likelihood that the Merger 18

SHAPIRO HABER & URMY LLP would be approved by the shareholders of HP and be consummated, is demonstrated by the stock 19 20 price performance of the Selected Companies on November 6, 2001. The index of the Selected

21 Companies increased only 1.48% on November 6, 2001 (over the index’s close on November 5,

22 2001), while, as previously noted, HP’s stock price increased 17.29% on that day. 23 118. A November 9, 2001, article in The Wall Street Journal, summed up the market’s 24 reaction to Hewlett’s opposition, pointing out that “H-P’s stock soared 17% Wednesday as H-P 25 investors showed they like the company better alone.” 26 27 119. The significant rise in the price of HP stock, on extremely high volume, as a result of

28 Hewlett’s announcement in the Hewlett Press Release of his opposition to the Merger: Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 (a.) demonstrates that prior thereto the market did not know or understand that Hewlett

2 was opposed to the Merger; 3 (b.) demonstrates that prior thereto the market did not know the Omitted Material Facts; 4 and 5 6 (c.) demonstrates that the announcement by Hewlett, in the Hewlett Press Release, that he 7 was opposed to the Merger surprised (and pleased) the marketplace.

8 120. The stock market’s reaction to learning of Hewlett’s opposition to the Merger from 9 the Hewlett Press Release demonstrates the materiality of the Omitted Material Facts, which the 10 Defendants knew, and intentionally, purposefully and with scienter, failed to disclose on September 11 3, 2001 and throughout the Class Period. 12 13

14 The Defendants Acted With Scienter, With the Intent to Defraud

15 121. When the Defendants issued the September 3, 2001 Press Release, without also 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, disclosing the Omitted Material Facts, the Defendants acted with scienter, with the intent to defraud. 17 The detailed facts alleged herein demonstrate, and give rise to a strong inference, that the 18

SHAPIRO HABER & URMY LLP Defendants acted intentionally to deceive, or acted with deliberate or conscious recklessness. 19 20 122. When the Defendants, throughout the Class Period, failed to disclose the Omitted

21 Material Facts to the investing public, the Defendants acted with scienter, with the intent to defraud.

22 The detailed facts alleged herein demonstrate, and give rise to a strong inference, that the 23 Defendants acted intentionally to deceive, or acted with deliberate or conscious recklessness. 24 123. The Defendants’ motivation to commit the fraud alleged herein, by failing to disclose 25 the Omitted Material Facts on September 3, 2001 and throughout the Class Period, was their desire 26 27 to have the Merger approved by the shareholders of Hewlett-Packard and to have the Merger

28 consummated, and the fact that disclosure of the Omitted Material Facts on September 3, 2001 and Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 throughout the Class Period would have decreased the likelihood of the Merger being approved by

2 the shareholders of Hewlett-Packard and decreased the likelihood of the Merger being 3 consummated. 4 124. The Defendants had been advised, prior to the Class Period, by their investment 5 6 banker, Goldman Sachs, and understood and expected that the proposed Merger would be very 7 controversial and would be negatively received by the marketplace, including people and institutions

8 which followed and owned substantial holdings of Hewlett-Packard stock. Goldman Sachs advised 9 the Defendants that Hewlett-Packard’s stock price would drop between 10 and 15 percent when the 10 proposed Merger was announced. Furthermore, Fiorina and Capellas (Compaq’s CEO) freely talked 11 about how “the market is going to hate this deal.” (Backfire at 183 - 184). 12 13 125. Under those circumstances, it was very important to the Defendants that when the 14 Merger was announced to the public, that the impression be created – EVEN IF IT WAS A FALSE

15 IMPRESSION – that there was no opposition to the Merger among the HP directors and that the 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, approval of the Merger by the shareholders of Hewlett-Packard was likely. As Wilson Sonsini 17 partner Marty Korman had explained to the HP Board at the August 31, 2001 meeting, if it was 18

SHAPIRO HABER & URMY LLP publicly known that the HP Board of Directors was divided regarding the Merger, it would give 19 20 investors one more reason to worry. (Backfire at 7-8). This impression was also what Larry

21 Sonsini, of Wilson Sonsini, was referring to when he stated at the August 31, 2001 Hewlett-Packard

22 Board meeting that unanimous approval of the Merger by the Hewlett-Packard Board would help the 23 “optics” of the deal and would improve the impression the proposed Merger would make on the 24 investment community. (Perfect Enough at 134). 25 126. Under those circumstances, the Defendants knew that if the marketplace learned that 26 27 Hewlett was opposed to the Merger, that knowledge would reinforce and expand the marketplace’s 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 opposition to the Merger, and would have caused the marketplace to question whether the approval

2 of the Merger by the shareholders of Hewlett-Packard was likely. 3 127. The Defendants, purposely and with the intent to deceive, did not disclose the 4 Omitted Material Facts in the September 3, 2001 Press Release and in each of their public 5 6 statements and SEC filings throughout the Class Period because they wanted to avoid the effect 7 which the disclosure of the Omitted Material Facts would have had – i.e. the reinforcement and

8 expansion of the marketplace’s opposition to the Merger (as detailed above) and the questioning by 9 the marketplace of the likelihood of the Merger being approved by the shareholders of Hewlett- 10 Packard. 11 128. Significantly, in a press release which the Defendants issued on November 6, 2001, 12 13 in response to the Hewlett Press Release, the Defendants admitted that they had expected 14 Hewlett to oppose the Merger. Specifically, the Defendants said:

15 “While we regret very much the Hewlett family’s decision [to vote their shares against the Merger], we are not surprised....” (emphasis 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, added) 17 A copy of the Defendants’ November 6, 2001 press release is attached hereto as Exhibit E and 18

SHAPIRO HABER & URMY LLP incorporated herein in full by reference. 19 20

21 CLASS ACTION ALLEGATIONS

22 129. The Plaintiff brings this action as a class action pursuant to Federal Rule of Civil 23 Procedure 23(a) and (b)(3) on behalf of a Class consisting of all persons or entities who sold shares 24 of Hewlett-Packard common stock from September 4, 2001 through November 5, 2001, and who 25 were damaged thereby. Excluded from the Class are Defendants; any director, officer, subsidiary, or 26 27 affiliate of HP or Compaq; members of the immediate family of any such excluded person; any 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 entity in which any excluded person or entity has a controlling interest; and the legal representatives,

2 heirs, successors and assigns of any excluded person or entity. 3 130. The members of the Class are so numerous that joinder of all members is 4 impracticable. While the exact number of Class members is unknown to Plaintiff at this time and 5 6 can only be ascertained through appropriate discovery, Plaintiff believes that there are many 7 thousands of members of the Class located throughout the United States. Throughout the Class

8 Period, HP common stock was actively traded in an efficient market on the New York Stock 9 Exchange. Record owners and other members of the Class may be identified from records 10 maintained by HP and/or its transfer agent and may be notified of the pendency of this action by 11 mail and publication, using forms of notice similar to those customarily used in securities class 12 13 actions. 14 131. Plaintiff’s claims are typical of the claims of other members of the Class as all

15 members of the Class were similarly affected by Defendants' wrongful conduct in violation of 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, federal law that is complained of herein. 17 132. Plaintiff will fairly and adequately protect the interests of the members of the Class 18

SHAPIRO HABER & URMY LLP and has retained counsel competent and experienced in class and securities litigation. 19 20 133. Common questions of law and fact exist as to all members of the Class and

21 predominate over any questions solely affecting individual members of the Class. Among the

22 questions of law and fact common to the Class are: 23 (a) Whether the federal securities laws were violated by Defendants’ acts and 24 omissions as alleged herein; 25 (b) Whether Defendants participated in and pursued the illegal course of conduct 26 27 complained of herein; 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 (c) Whether statements disseminated to the investing public during the Class

2 Period were misrepresentations and/or suffered from omissions of material 3 information as alleged herein; 4 (d) Whether the market price of HP common stock during the Class Period was 5 6 artificially deflated due to the material misrepresentations and omissions 7 complained of herein;

8 (e) To what extent the members of the Class have sustained damages and the 9 proper measure of damages. 10 134. A class action is superior to all other available methods for the fair and efficient 11 adjudication of this controversy since joinder of all members is impracticable. As the damages 12 13 suffered by individual Class members may be relatively small, the expense and burden of individual 14 litigations make it impossible for members of the Class individually to seek redress for the wrongs

15 done to them. There will be no difficulty in the management of this suit as a class action. 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 COUNT I

18 AGAINST DEFENDANTS HEWLETT-PACKARD AND FIORINA FOR

SHAPIRO HABER & URMY LLP VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE 19 10b-5 PROMULGATED THEREUNDER. 20

21 135. Plaintiff repeats and realleges each and every allegation set forth above.

22 136. During the Class Period, Defendants, and each of them, carried out a plan, scheme 23 and course of conduct that was intended to and did deceive the investing public, including Plaintiff 24 and other Class members, as alleged herein. In furtherance of this unlawful scheme, plan, and 25 course of conduct, Defendants, and each of them, took the actions set forth herein. 26 27 137. During the Class Period, Defendants, and each of them, carried out a plan, scheme

28 and course of conduct that had the effect of artificially deflating the market price of Hewlett-Packard Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 common stock; and causing Plaintiff and other members of the Class to sell Hewlett-Packard stock

2 at artificially deflated prices. In furtherance of this unlawful scheme, plan, and course of conduct, 3 Defendants, and each of them, took the actions set forth herein. 4 138. The Defendants: (a) employed devices, schemes and artifices to defraud; (b) made 5 6 untrue statements of material fact and/or omitted to state material facts necessary to make the 7 statements not misleading; and (c) engaged in acts, practices and a course of business which

8 operated as a fraud and deceit upon the sellers of Hewlett-Packard common stock in violation of 9 Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. 10 139. Defendants' material misrepresentations and/or omissions were done knowingly or 11 recklessly and with scienter. 12 13 140. As a result of the Defendants’ dissemination of the deceptive and misleading 14 information regarding the Merger and their failure to disclose the Omitted Material Facts, as set

15 forth above, the market price of Hewlett-Packard’s common stock was artificially deflated during 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, the Class Period. In ignorance of the fact that the market price of Hewlett-Packard’s shares was 17 artificially deflated, and relying upon the integrity of the market in which Hewlett-Packard common 18

SHAPIRO HABER & URMY LLP stock trades, and/or on the absence of material information (the Omitted Material Facts) that was 19 20 known by Defendants but was intentionally, purposely, knowingly or recklessly, and with scienter,

21 not disclosed to the investing public by Defendants during the Class Period, Plaintiff and the other

22 members of the Class sold Hewlett-Packard common stock during the Class Period at artificially 23 deflated prices and were damaged thereby. 24 141. At the time of said misrepresentations and omissions, Plaintiff and the other members 25 of the Class were ignorant of the Omitted Material Facts and believed Defendants’ statements 26 27 regarding the Merger to be completely truthful, candid and not deceptive or misleading or suffering

28 from omissions of material facts. Had Plaintiff and the other members of the Class known of the Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 Omitted Material Facts, Plaintiff and the other members of the Class would not have sold their

2 Hewlett-Packard common stock during the Class Period, or, if they had sold their Hewlett-Packard 3 stock during the Class Period, they would not have done so at the artificially deflated prices which 4 they received for their Hewlett-Packard common stock which they sold during the Class Period. 5 6 142. By virtue of the foregoing, each of the Defendants violated Section 10(b) of the 7 Exchange Act and Rule 10b-5 promulgated thereunder.

8 143. As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the 9 other members of the Class suffered damages in connection with their sales of Hewlett-Packard 10 common stock during the Class Period. 11

12 13 COUNT II

14 AGAINST DEFENDANT FIORINA PURSUANT TO SECTION 20(a) OF THE EXCHANGE ACT 15 144. Plaintiff repeats and realleges each and every allegation set forth above. 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, 17 145. This claim is asserted against Defendant Fiorina pursuant to Section 20(a) of the

18 Exchange Act, 15 U.S.C. § 78t(a). SHAPIRO HABER & URMY LLP 19 146. At all times relevant hereto, Defendant Fiorina was a “controlling person” of 20 Defendant Hewlett-Packard, within the meaning of Section 20(a) of the Exchange Act. 21 147. Fiorina was a “controlling person” of the Defendant Hewlett-Packard because, in her 22 23 capacity as Chief Executive Officer and Chairman of the Board of Directors of Hewlett-Packard, she 24 had the influence and power over Hewlett-Packard to cause, and she did cause, Hewlett-Packard to

25 engage in the wrongful conduct complained of herein, and because she had the power to have 26 prevented Hewlett-Packard from engaging in the unlawful conduct alleged herein, but she purposely 27 and intentionally did not use that power to do so. 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 148. As set forth above in Count I, Hewlett-Packard violated Section 10(b) of the

2 Exchange Act and Rule 10b-5 promulgated thereunder by its acts and omissions as alleged in this 3 Complaint. By virtue of her status as a “controlling person” of Hewlett-Packard, Fiorina is liable, to 4 the same extent as is Hewlett-Packard, for Hewlett-Packard's violations of Section 10(b) of the 5 6 Exchange Act and Rule 10b-5 promulgated thereunder, pursuant to Section 20(a) of the Exchange 7 Act.

8 PRAYERS FOR RELIEF 9 WHEREFORE, Plaintiff, on behalf of itself and the Class, pray for judgment as follows: 10 A. declaring this action to be a plaintiff class action properly maintained pursuant to 11 Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure; 12 13 B. finding that the Defendants violated Section 10(b) of the Exchange Act and Rule 14 10b-5 promulgated thereunder by their acts and omissions as alleged in this Complaint;

15 C. awarding Plaintiff and the members of the Class damages, together with interest 53 State Street (617) 439-3939 439-3939 (617) 16 Boston, MA 02109 MA Boston, thereon; 17 D. awarding Plaintiff and other members of the Class their costs and expenses of this 18

SHAPIRO HABER & URMY LLP litigation, including reasonable attorneys' fees and experts' fees and other costs and disbursements; 19 20 and

21 E. awarding Plaintiff and other members of the Class such other and further

22 relief as may be just and proper under the circumstances. 23

24

25

26 27

28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

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1 JURY TRIAL DEMAND

2 Plaintiff demands a trial by jury. 3 Dated: April 7, 2006 4 Respectfully submitted by the attorneys For the Plaintiff and the Class, 5 /s/ Edward F. Haber______6 Edward F. Haber (pro hac vice) SHAPIRO HABER & URMY LLP 7 53 State Street Boston, MA 02109 8 Telephone: (617) 439-3939 9 Lead Counsel 10 Martin D. Chitwood 11 CHITWOOD HARLEY HARNES LLP 2300 Promenade II 12 1230 Peachtree St., NE Atlanta, GA 30309 13 Telephone: (404) 873-3900

14 Gregory E. Keller John F. Harnes 15 CHITWOOD HARLEY HARNES LLP 11 Grace Avenue 53 State Street (617) 439-3939 439-3939 (617) 16 Suite 306 Boston, MA 02109 MA Boston, Great Neck, NY 11021 17 Robert C. Schubert S.B.N. 62684 18 SCHUBERT & REED LLP

SHAPIRO HABER & URMY LLP Three Embarcadero Center, Suite 1650 19 San Francisco, CA 94111 Telephone: (415) 788-4220 20 Andrew Schatz 21 SCHATZ & NOBEL, PC One Corporate Center 22 20 Church Street, Suite 1700 23 Hartford, CT 06103 (860) 493-6292 24

25 26 27 28 Amended Class Action Complaint Case No. 05-CV-02047 (CRB)

-42- MEETING OF STOCKHOLDERS O F HEWLETT-PACKARD COMPAN Y

PROXY STATEMENT OF WALTER B. HEWLETT EDWIN E. VAN BRONKHORS T THE WILLIAM R. HEWLETT REVOCABLE TRUS T

This proxy statement and the enclosed GREEN proxy card are being furnished to you, the stockholders of Hewlett-Packard Company ("HP"), in connection with the solicitation of proxies by Walter B . .Hewlett, Edwin E. van Bronkhorst and The William R . Hewlett Revocable Trust (the "Trust") for use at the meeting of stockholders of HP, and at any adjournments or postponements thereof, relating to the proposed merger involving Compaq Computer Corporation ("Compaq") and HP (the "Special Meeting") . Pursuant to this proxy statement, we are soliciting proxies from holders of shares of HP common stock to vote AGAINST the proposal to issue shares of HP common stock in connection with the proposed merger involving HP and Compaq. HP has not yet announced the date, time or location of the Special Meeting . We are soliciting proxies for use at the Special Meeting whenever and wherever it may be held .

A proxy may be given by any person who held shares of HP common stock on January 28, 2002, the record date for the Special Meeting . Whether or not you plan to attend the Special Meeting, you are urged to sign and date the enclosed GREEN proxy card and return it in the postage-paid envelope provided . Your latest-dated proxy is the only one that counts, so you may return the GREEN proxy card even if you have already delivered any other proxy . Please do not return any proxy sent to you by HP . If you have already returned a white proxy card sent to you by HP, that card will be automatically revoked if you complete and return the enclosed GREEN proxy card . It is very important that you date your proxy . This proxy statement is provided by Walter B . Hewlett, Edwin E . van Bronkhorst and the Trust and not by the board of directors of HP .

This proxy statement and the enclosed GREEN proxy card are first being sent or given to stockholders of HP on or about February 5, 2002 . BACKGROUND OF THE DECISION TO OPPOSE THE PROPOSED MERGER

Walter Hewlett has been a director of HP for more than 14 years and has been involved with HP in various ways for most of his life . Mr. Hewlett is a graduate of Harvard University and has received graduate degrees from Stanford University . He is a member of the board of directors of Agilent Technologies, Inc ., which was spun off from HP in 1999, and is also a member of the Board of Overseers of Harvard University . Mr. Hewlett is also chairman of the William and Flora Hewlett Foundation (the "Hewlett Foundation") . The Trust and the Hewlett Foundation collectively own approximately 108 .5 million shares (5.6%) of HP common stock worth approximately $2 .4 billion as of February 4, 2002 . Mr. Hewlett has always had enormous respect for HP, for the outstanding achievements of its management and employees and for the culture of innovation and integrity that has contributed to its outstanding success . As a stockholder and director of HP, Mr . Hewlett believes that the HP board owes a duty to pursue stockholder value and to guide HP to profitable growth for the benefit of its stockholders and employees . His decision to solicit your proxy is entirely motivated by what he believes is in the best interests of stockholders from a financial perspective .

Edwin E . van Bronkhorst is a former Chief Financial Officer of HP and co-trustee of the Trust with Mr. Hewlett . The Trust is a charitable trust set up by the late William R. Hewlett .

Walter Hewlett's statements herein as to what occurred at HP board meetings is based on his personal knowledge and recollection.

Mr. Hewlett was first made aware that Carleton S . Fiorina, Chairman and Chief Executive Officer of HP, was discussing a transaction with Compaq at an HP board meeting in May 2001 . Between May 2001 and September 2001, the HP board discussed the proposed merger at meetings held on May 18, June 24, July 10, July 19, July 20, July 30, August 6, August 25, August 31 and September 3, 2001 . Mr. Hewlett attended each board meeting at which the Compaq transaction was discussed other than the meetings on July 10, 19 and 30, 2001. During this three-month period, he carefully considered the merits of the proposed transaction . In considering the proposed transaction, Mr . Hewlett gave thoughtful consideration to the materials provided to him, asked questions about all financial and other aspects of the proposed merger, requested that the HP board be provided with further analysis of large technology companies and other big businesses and the relationship between their long-term growth rates and their price/earnings ratios, and discussed his concerns about the proposed merger with his fellow directors and the board's advisors .

Mr. Hewlett's concerns were, and still are, focused on his belief that the proposed merger will permanently destroy stockholder value . He does not believe HP should dilute its stockholders' ownership in the imaging and printing business and increase their exposure to the commodity PC business, which is currently unprofitable for both HP and Compaq . He also believes that mergers involving computing companies have consistently destroyed stockholder value, and that HP should not expose its stockholders to that risk.

Despite Mr. Hewlett's vocal opposition, Ms . Fiorina and the rest of the HP board continued to pursue the proposed merger, culminating in HP board meetings at the end of August and the beginning of September 2001 to approve the terms of the proposed merger . At these meetings, Mr . Hewlett and other members of the HP board were kept apprised of:

• the status of negotiations between HP and Compaq,

• the views of HP's advisors ,

• the status of negotiations with respect to the post-merger management structure of the combined company, an d

• the significant multi-year compensation packages contemplated to be given to Ms . Fiorina, Michael D. Capetlas, Chairman and Chief Executive Officer of Compaq, and other members of senior management following the proposed merger . Mr. Hewlett continued to express his view that the proposed merger was not the appropriate course for HP at these meetings .

On Friday, August 31, 2001, just three days before the HP board was asked to vote on the merger agreement, at an HP board meeting, Larry Sonsini, HP's outside legal counsel, informed the HP board that the merger agreement being presented to the board required unanimous approval by the HP board . Mr. Hewlett then made clear to the entire board that the unanimous vote requirement put him in a very difficult position, as he was not persuaded that the proposed merger was in the best interests of HP or its stockholders . At this point in time, Mr . Hewlett understood that the only major open issue was the exchange ratio (that is, the price HP would pay for Compaq) . Additionally, all of the directors were told that HP and Compaq were still vigorously negotiating over the exchange ratio .

Mr. Sonsini then asked to speak with Mr. Hewlett outside the presence of the rest of the board members . During this discussion, Mr . Sonsini informed Mr. Hewlett that HP was going to proceed with the proposed merger whether or not Mr . Hewlett voted in favor of it as a director . Mr. Hewlett then asked Mr . Sonsini whether he could abstain from the director vote . Mr. Sonsini advised Mr . Hewlett that he could not abstain under the existing terms of the merger agreement. Mr. Sonsini also advised Mr . Hewlett that, even if he voted to approve the proposed merger as a board member, he could still vote against it as a stockholder . Mr. Hewlett knew that if he voted against the proposed merger as a director, the provision stating that the HP board had unanimously approved the proposed merger would have to be revised . Given Mr. Hewlett's understanding that the exchange ratio was the only significant open issue and that HP and Compaq were vigorously negotiating over the exchange ratio, and in light of Mr. Hewlett's conversation with Mr. Sonsini, Mr. Hewlett believed that if he voted against the proposed merger as a director, HP would have to pay a higher price for Compaq . Since, based on his conversation with Mr . Sonsini, Mr. Hewlett believed the proposed merger was certain to be approved by the board without his vote and because he believed it was in the best interests of HP stockholders to negotiate the best possible price for Compaq if the proposed merger were to be submitted to a stockholder vote, Mr. Hewlett determined to vote for the proposed transaction as a director and give stockholders the opportunity to make their own decision .

On Monday, September 3, 2001, during the telephone call in which the proposed merger was approved by the HP board, Mr. Hewlett informed the board that he might notsupport the proposed merger_ as_ stockholder, and that, if the vote were to occur on that day, he would vote against the proposed merger as a stockholder. Mr. Hewlett intended to oppose the proposed merger as a stockholder at that time due to his concerns as described above . His concerns have only strengthened since that time as the market and analysts have reacted negatively to the transaction, the independent stock committee of the Hewlett Foundation and the David and Lucile Packard Foundation (the "Packard Foundation"), after careful analysis, made their announcements regarding their intentions to vote against the proposed merger, and Mr . Hewlett's financial advisor provided the Trust with its report with respect to the proposed merger .

Announcement of the Proposed Merger and Subsequent Events

The proposed merger was announced in the late evening on September 3, 2001 . On the day after the announcement, HP's share price dropped from $23 .21 to $18 .87, a decline of 18 .7% and an aggregate loss of approximately $8 .5 billion of stockholder value . Shortly thereafter, negative commentary from industry analysts began. HP management then spent two months actively promoting the proposed merger in numerous presentations to institutional stockholders . Notwithstanding these presentations and HP management's active promotion of the proposed merger, the share price continued to fall, reaching $16 .89 on November 5, 2001, a decline of 27 .2% from the pre-announcement price, an aggregate loss of approximately $12.4 billion. During the same time, an index of comparable companies (consisting of Accenture Ltd, Apple Computer, Inc ., Computer Sciences Corporation, Dell Computer Corporation ("Dell"), Electronic Data Systems Corporation, EMC Corporation, Gateway, Inc ., International Business Machines Corporation, KPMG International, Network Appliance, Inc . and Sun Microsystems, Inc .) increased 9 .9%. These comparable companies are the same companies used by Goldman Sachs in performing its "Selected Companies Analysis" in connection with rendering its fairness opinion to HP .

Mr. Hewlett's concerns about the proposed merger were confirmed by the market reaction to the announcement, which Mr . Hewlett viewed as a sign of significant stockholder dissatisfaction with the proposed merger. Additionally, many Wall Street analysts and industry experts have publicly stated their unfavorable view of the proposed merger .

Mr. Hewlett's interests in the HP stockholder vote on the proposed merger are p rimarily as a fiduciary of the Trust and as Chairm an of the Hewlett Foundation . The Hewlett Foundation and the Trust were established to support charitable endeavors, and, as significant HP stockholders, they are strictly focused on the value of the HP common stock. As a director of HP, Mr. Hewlett is similarly focused on maximizing stockholder value .

After the proposed merger was announced, the independent stock committee of the Hewlett Foundation, which is responsible for all voting and investment decisions with respect to HP common stock held by the Hewlett Foundation, undertook an analysis of the proposed merger to determine how it would affect the value of the Hewlett Foundation's shares . The independent stock committee includes no Hewlett family members or HP employees or directors .

Mr. Hewlett and his co-trustee of the Trust, Edwin E . van Bronkhorst, were advised by counsel to the Trust that, although the Trust could independently determine how to vote on the proposed merger, the Trust should give serious consideration to the decision of the Hewlett Foundation's independent stock committee on the vote, since the terms of the Trust require that all of the Trust's HP shares (or the proceeds from their sale) be distributed to the Hewlett Foundation . To further inform their decision, the trustees of the Trust engaged Friedman Fleischer & Lowe, LLC ("FFL"), a San Francisco investment firm, to independently evaluate the proposed merger on behalf of the Trust .

The independent stock committee asked Laurance R . Hoagland, the Hewlett Foundation's Chief Investment Officer and former President and Chief Executive Officer of Stanford Management Company, which oversees Stanford University's $10 .0 billion investment portfolio, to analyze the proposed merger . Mr. Hoagland was aware that Mr . Hewlett was opposed to the merger as an individual stockholder, that the Trust's counsel had advised it to give serious consideration to the independent stock committee's decision and that the Trust, for which Mr. Ilewletf and Mr . van Bronkhorst serve as trustees, had not-yet determined how it was going to vote its shares with respect to the proposed merger . Mr. Hewlett confirmed to Mr. Hoagland that he understood that Mr . Hoagland would prepare his recommendations to the committee, and that the committee would decide how to vote the Foundation's HP shares, independently of Mr . Hewlett's views as an individual stockholder . The Hewlett Foundation's independent stock committee, considering among other things the advice of Mr. Hoagland and the various industry experts and investment professionals he consulted, concluded that the proposed merger was not in the Hewlett Foundation's best interests and determined that it would vote against the proposed merger . Mr. Hewlett had no discussions with any member of the independent stock committee regarding his views on the proposed merger prior to its reaching its determination . Ms. Fiorina and Robert P . Wayman, Executive Vice President, Finance and Administration and Chief Financial Officer of HP, did, however, meet with the Hewlett Foundation's investment staff, including Mr . Hoagland, regarding the proposed merger before Mr. Hoagland made his recommendation to the independent stock committee. The independent stock committee made its own determination as to the timing of its decision with respect to the proposed merger . The independent stock committee's decision was then reported to the Hewlett Foundation board and to Walter Hewlett and Edwin E . van Bronkhorst, as trustees of the Trust. Thereafter, Walter Hewlett and Edwin E . van Bronkhorst, considering among other things the advice of FFL and the decision of the independent stock committee, concluded that the proposed merger was not in the Trust's best interests and determined to vote the Trust's shares against the proposed merger .

In light of Mr . Hewlett's review of FFL's report relating to the proposed merger, knowledge that the Hewlett Foundation had independently determined that the proposed merger was not in its best interests, and observation of the stock market's reaction to the proposed merger, Mr . Hewlett determined that it was in the HP stockholders' best interests to make his views known publicly in an effort to terminate the transaction as soon as possible and avoid exposing HP to continued uncertainty about its future . On November 6, 2001, he announced that the Hewlett Foundation, the Trust, his sisters Eleanor Hewlett Gimon and Mary Hewlett Jaffe and he would all vote against the proposed merger . Later that same day, David Woodley Packard separately announced that he too was against the proposed merger and would vote his HP shares against the proposed merger. Once again, the market reinforced Mr. Hewlett's belief that the proposed merger was not beneficial for HP - HP shares rose from $16 .89 to $19 .81, or 17 .3%, gaining $5 .7 billion in aggregate market value on the day of Mr . Hewlett's announcement . HP's largest stockholder, the Packard Foundation, which owns approximately 201 .3 million shares (10.4%) of HP common stock worth approximately $4 .4 billion as of February 4, 2002, conducted its own process, independent of Mr . Hewlett, to determine how to vote its shares on the proposed merger . We understand that this decision process involved the full board of the Packard Foundation, which consists of five members of the Packard family and seven other directors, including a former chief executive officer and a former chief operating officer of HP . We understand that the Packard Foundation retained technology and management consulting firm Booz-Allen & Hamilton ("BAH") to assist it in determining how to vote its shares. We further understand that BAH and members of the Packard Foundation board met with senior members of both HP and Compaq management, including Ms . Fiorina, Mr. Wayman and Mr. Capellas, to discuss the proposed merger . Mr. Hewlett also met with members of the Packard Foundation to discuss his views on the proposed merger. On December 7, 2001, the Packard Foundation announced the preliminary decision of its board to vote against the proposed merger; we understand that this decision was by a unanimous vote of the Packard Foundation board . The Packard Foundation is not acting with Mr . Hewlett, Mr. van Bronkhorst or the Trust and has not entered into an agreement with such persons or any other participant in this solicitation with respect to the voting of its shares on the proposed merger. By December 7, 2001, the independent stock committee of the Hewlett Foundation, 12 directors of the Packard Foundation and the trustees of the Trust had all determined that the proposed merger was not in their best interests . These interests represent approximately 16 .0% of the outstanding HP common stock. Despite the substantial stockholder and investment community opposition, Ms. Fiorina's public state- ments, and those of several other members of the HP board, are to the effect that they are determined to take the transaction to a vote . It should be noted that under the HP/Compaq merger agreement, HP is contractually obligated to use its reasonable efforts to support the merger and obtain its approval, and the HP board is obligated to recommend the proposed merger to HP's stockholders and is prohibited from changing its recommendation unless a superior offer for HP emerges . If a superior offer for HP emerges, the HP board could change its recommendation, in which event Compaq would be entitled to terminate the merger agreement and obtain from HP a $675 million breakup fee . On the other hand, if the proposed merger is taken to a vote and not approved by HP stockholders, HP can terminate the agreement at its option and would not be obligated to pay Compaq any breakup fee . Additionally, if HP and Compaq were to mutually agree to terminate the proposed merger, no breakup fee would be payable .

Mr. Hewlett remains determined to stop the proposed merger . His opposition is based on his firm commitment to stockholder value and his firm belief, shared by the Hewlett Foundation, the Packard Foundation, many other stockholders, many HP employees and many Wall Street analysts, that the proposed merger is not in the best interests of HP's stockholders . To that end, we are soliciting your proxy to vote AGAINST the proposed merger . lip U 41 D sr ms

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company information HEWLETT-PACKARD AND 4 newsroo m search COMPAQ AGREE TO --~ press releases 4 contact hp MERGE, CREATING $87 - feature stories 4 company information 4 hp ads home BILLION GLOBAL TECHN O LOGY LEADER -~ hp-Compaq merge r about h p hp in the community Will Offer Businesses And Consumers Mos t hp labs Complete Set Of Products And Services, With investor relations Commitment To Open Systems An d newsroom Architecture s executive team

Will Have #1 Wor ldwide Positions In Servers, PCs and Hand-hells, and Imaging an d Printing ; Leading Positions In IT Services , Storage, Management Software

Companies Expect Annual Cost Synergies Of Approximately $2 .5 Billion ; Transaction Expected To Be Substantially Accretive In Year On e

PALO ALTO, CA and HOUSTON , TX, September 3, 200 1

Hewlett-Packard Company (NYSE : HWP) and Compaq Computer Corporation (NYSE : CPQ) announced today a definitive merger agreement to create an $87 billion global technology leader . The new HP will offer the industry's most complete set of IT products and services for both businesses and consumers, with a commitment to serving customers with open systems and architectures . The combined company will have #1 worldwide revenue positions in servers, access devices (PCs and hand- helds ) and imaging and printing, as well as leading revenue positions in IT services, storage and management software .

The merger is expected to generate cost synergies reaching approximately $2 .5 billion annually and drive a significantly improved cost structure . Based on both companies' last four reported fiscal quarters, the new HP would have approximate pro forma assets of $56 .4 billion, annual revenues of $87 .4 billion and annual operating earnings of $3 .9 billion . It would also have operations in more than 160 countries and over 145,000 employees .

Carly Fiorina, chairman and chief executive officer of HP, will be chairman and CEO of the new HP . Michael Capellas, chairman and chief executive officer of Compaq, will be president . Capellas and four other members of Compaq's current Board of Directors will join HP's Board upon closing .

"This Is a decisive move that accelerates our strategy and positions us to win by offering even greater value to our customers and partners," said Fiorina . "In addition to the clear strategic benefits of combining two highly complementary organizations and product families, we can create substantial shareowner value through significant cost structure improvements and access to new growth opportunities . At a particularly challenging time for the IT Industry, this combination vaults us into a leadership role with customers and partners -- together we will shape the industry for years to come ."

Capelias said, "We are creating a new kind of industry leader -- one founded on customer success, world-class engineering, and best of breed products and services . In sharp contrast to our competitors, we are committed to leading the Industry to open, market-unifying architectures and interoperability, which reduce complexity and cost for our customers . With this move, we will change the basis of competition in the industry ."

Under the terms of the agreement, unanimously approved by both Boards of Directors, Compaq shareowners will receive 0.6325 of a newly issued HP share for each share of Compaq, giving the merger a current value of approximately $25 billion . HP shareowners will own approximately 64% and Compaq shareowners 36% of the merged company . The transaction, which is expected to be tax-free to shareowners of both companies for U .S. federal income tax purposes, will be accounted for as a purchase .

The transaction is expected to be substantially accretive to HP's pro forma earnings per share in the first full year of combined operations based on achieving planned cost synergies . Cost synergies of approximately $2 .0 billion are expected in fiscal 2003, the first full year of combined operations . Fully realized synergies are expected to reach a run rate of approximately $2 .5 billion by mid-fiscal 2004. These anticipated synergies result from product rationalization ; efficiencies in administration, procurement, manufacturing and marketing ; and savings from improved direct distribution of PCs and servers . Subject to regulatory and shareowner approvals and customary closing conditions, the transaction is expected to close in the first half of 2002 . In connection with the transaction, both companies have adopted shareowner rights plans ; information on these plans will be filed today with the Securities and Exchange Commission .

The merged entity will be headquartered in Palo Alto and retain a significant presence in Houston, which will be a key strategic center of engineering excellence and product development .

The new HP will be structured around four operating units that build on the companies' similar go-to-market and product development structures to provide clear customer and competitive focus . Leadership and estimated revenues (calculated by combining the two companies' trailing four reported fiscal quarters) are as follows :

• A $20 billion Imaging and Printing franchise to be led by Vyomesh Joshi, currently president, Imaging and Printing Systems, of HP . • A $29 billion Access Devices business to be led by Duane Zitzner, currently president, Computing Systems, of HP . • A $23 billion IT Infrastructure business, encompassin g servers, storage and software, to be led by Peter Blackmore, currently executive vice president, Sales and Services, of Compaq . • A $15 billion Services business with approximately 65,000 employees in consulting, support and outsourcing to be led by Ann Livermore, currently president, HP Services .

The chief financial officer of the combined entity will be Robert Wayman, chief financial officer of HP . The integration team will be led by Webb McKinney, currently president of HP's Business Customer Organization, and Jeff Clarke, chief financial officer of Compaq .

Fiorina concluded, "Clearly, the potential of this combination is compelling, but we understand the magnitude of the challenge ana the neea ror aiscipime ano speea . were neipea oy me tact that both companies have been pursuing similar organizational structures and sales force models, and there is immense talent resident in both organizations . We have done comprehensive integration planning and have clear metrics to drive ou r success . We are committed to achieving the synergies we have identified while maintaining our competitive position and momentum in the marketplace ."

Investment Community and Media Event Informatio n

The companies will host a meeting for the investment community Tuesday, Sept . 4, at 9 a .m . EDT at the Equitable Building in New York City, 787 Seventh Avenue (between 51st & 52nd streets) in the Auditorium, Lower Level . Those unable to attend may listen by calling (888) 849-9184 (US) or (212) 896- 6074 (international), using reservation number : 19649821 . The event can also be accessed via audiocast at www .hp.com or www compaaq ggga.. The slides used for this presentation will be available on each company's website 10 minutes prior to the start of the event . A replay will be available for 14 days following the meeting at (800) 633-8284 (US) or (858) 812- 6440 (international), using reservation number : 19649821 . There will also be a question and answer session for the media at 10 :30 a .m . EDT following the analyst meeting, also in the Equitable Auditorium . Those unable to attend may participate by calling (888) 754-3420 (US) or (212) 676-5416 (international), using reservation number : 19650338 . The event can also be accessed via audiocast at www .ha com or www .compeq .com . A replay will be available for 14 days following the meeting at (800) 633-8284 (US) or (858) 812-6440 (international), using reservation number : 19650338 .

Fact Shee t

A fact sheet related to the merger is attached to this press release .

Calculation of Combined Revenue s

The statements of combined revenues in this release and the attached fact sheet are estimates and have been calculated by adding similar category information from the companies' separate filings with the Securities Exchange Commission for each of their past four fiscal quarters . Because the companies have different fiscal year-ends, these estimates do not track a matching time period . The measurement method described above may result in amounts that differ from amounts resulting from other methodologies the companies may use in the future .

About H P

Hewlett-Packard Company -- a leading global provider of computing and imaging solutions and services -- is focused on making technology and its benefits accessible to all . HP had total revenue from continuing operations of $48 .8 billion in its 2000 fiscal year . Information about HP and its products can be found on the World Wide Web at wwvv,h p.com .

About Compa q

Compaq Computer Corporation is a leading global provider of enterprise technology and solutions . Compaq designs, develops, manufactures and markets hardware, software, solutions and services, including industry -leading enterprise storage and computing solutions, fault-tolerant business-critical solutions, communication products, and desktop and portable personal computers that are sold in more than 200 countries . Information on Compaq and its products and services is available at www, com p_a~.com . waarroundi L nYvrmaciun aDuue cn+e merger dna Where to Find I t

This Information pertains to this document and all related documents linked from this one . HP and Compaq intend to file with the SEC a joint proxy statement/prospectus and other relevant materials in connection with the Merger . The joint proxy statement/prospectus will be mailed to the stockholders of HP and Compaq . Investors and security holders of HP and Compaq are urged to read the joint proxy statement/ prospectus and the other relevant materials when they become available because they will contain important information about HP, Compaq and the Merger . The joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by HP or Compaq with the SEC, may be obtained free of charge at the SEC's web site at www .sec .go . In addition, investors and security holders may obtain free copies of the documents filed with the SEC by HP by contacting HP Investor Relations, 3000 Hanover Street, Palo Alto, California 94304, 650-857-1501 . Investors and security holders may obtain free copies of the documents filed with the SEC by Compaq by contacting Compaq Investor Relations, P .O. Box 692000, Houston, Texas 77269-2000, 800-433-2391 . Investors and security holders are urged to read the joint proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision with respect to the Merger .

HP, Carleton S . Fiorina, HP's Chairman of the Board and Chief Executive Officer, Robert P . Wayman, HP's Executive Vice President and Chief Financial Officer, and certain of HP's other executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of HP and Compaq in favor of the Merger. The other executive officers and directors of HP who may be participants in the solicitation of proxies in connection with the Merger have not been determined as of the date of this filing . A description of the interests of Ms . Fiorina, Mr . Wayman and HP's other executive officers and directors in HP is set forth in the proxy statement for HP's 2001 Annual Meeting of Stockholders, which was filed with the SEC on January 25, 2001 . Full participant Information may be found in HP's Form 425 filed with the SEC on September 24, 2001 . Investors and security holders may obtain more detailed information regarding the direct and indirect interests of Ms . Fiorina, Mr. Wayman and HP's other executive officers and directors in the Merger by reading the joint proxy statement/prospectus when it becomes available .

Compaq and Michael D . Capellas, Compaq's Chairman and Chief Executive Officer, and certain of Compaq's other executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of Compaq and HP in favor of the Merger . The other executive officers and directors of Compaq who may be participants in the solicitation of proxies in connection with the Merger have not been determined as of the date of this filing . A description of the interests of Mr . Capellas and Compaq's other executive officers and directors in Compaq is set forth in the proxy statement for Compaq's 2001 Annual Meeting of Stockholders, which was filed with the SEC on March 12, 2001 . Full participant information may be found in Compaq's Form 425 filed with the SEC on September 25, 2001, Investors and security holders may obtain more detailed information regarding the direct and indirect interests of Mr . Capellas and Compaq's other executive officers and directors in the Merger by reading the joint proxy statement/prospectus when it becomes available ,

HP/COMPAQ FACT SHEE T

Transaction Summary :

Structure : Stock-for-stock merge r Exchange Ratio : 0 .6325 of an HP share per Compaq share Current Value : Approximately $25 billion Ownership : HP shareholders 64% ; Compaq shareholders 36 % Accounting : Purchase Expected First half of 2002 Closing :

Overview :

• Creates an $87 billion global technology leader, with the industry's most complete set of IT products and services for both businesses and consumers . • New HP would be the #1 global player in servers, imaging & printing, and access devices (PCs & hand- helds), as well as Top 3 player in IT services, storage and management software . • The combination furthers each company's commitment to open, market-unifying systems and architectures and aggressive direct and channel distribution models . • Combined company can create substantial shareowner value through significant cost structure improvements and access to new growth opportunities . • Transaction expected to be substantially accretive to pro forma EPS in first full year of combined operations . • The merger is expected to generate cost synergies of approximately $2 .0 billion in. fiscal 2003, the first full year of operations ; fully realized synergies are expected to reach a run rate of approximately $2 .5 billion by mid- fiscal 2004 . . • New HP would have operations in more than 160 countries and over 145,000 employees .

Key HP Compaq Pro Forma Facts Combine d (last 4 qtrs) :

Total $47 .0 billion $40 .4 billion $87 .4 billion Revenue s

Assets $32 .4 billion $23 .9 billion $56 .4 billion

Operating $2.1 billion $1 .9 billion $3 .9 billion Earning s

Leadership :

• Board of Directors : 5 Compaq directors to join HP Board • Chairman and Chief Executive Officer : Carly Fiorin a • President : Michael Capella s • Chief Financial Officer : Robert Wayman • Imaging & Printing : Vyomesh Josh i • Access Devices : Duane Zitzne r • IT Infrastructure : Peter Blackmore • Services : Ann Livermore

FORWARD-LOOKING STATEMENT S

This document contains forward-looking statements that involve risks, uncertainties and assumptions . If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, the results of HP and its consolidated subsidiaries could differ materially from those expressed or implied by such forward- looking statements .

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenues, synergies, accretion or other financial items ; any statements of the plans, strategies, and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings, approvals and closings relating to the Merger or other planned acquisitions ; any statements concerning proposed new products, services, developments or industry rankings ; any statements regarding future economic conditipns or performance ; any statements of belief and any statements of assumptions underlying any of the foregoing .

The risks, uncertainties and assumptions referred to above include the ability of HP to retain and motivate key employees ; the timely development, production and acceptance of products and services and their feature sets ; the challenge of managing asset levels, including inventory ; the flow of products into third-party distribution channels ; the difficulty of keeping expense growth at modest levels while increasing revenues ; the challenges of integration and restructuring associated with the Merger or other planned acquisitions and the challenges of achieving anticipated synergies ; the possibility that the Merger or other planned acquisitions may not close or that HP, Compaq or other parties to planned acquisitions may be required to modify some aspects of the acquisition transactions in order to obtain regulatory approvals ; the assumption of maintaining revenues on a combined company basis following the close of the Merger or other planned acquisitions ; and other risks that are described from time to time In HP's Securities and Exchange Commission reports, including but not limited to HP's annual report on Form 10-K, as amended on January 30, 2002, for the fiscal year ended October 31, 2001 and HP's registration statement on Form S-4 filed on February 5, 2002 .

HP assumes no obligation and does not intend to update these forward-looking statements .

ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND I T

On February 5, 2002, HP filed a registration statement with the SEC containing a definitive joint proxy statement/ prospectus regarding the Merger . Investors and security holders of HP and Compaq are urged to read the definitive joint proxy statement/prospectus filed with the SEC on February 5, 2002 and any other relevant materials filed by HP or Compaq with the SEC because they contain, or will contain, important information about HP, Compaq and the Merger . The definitive joint proxy state men t/ prospectus and other relevant materials (when they become available), and any other documents filed by HP or Compaq with the SEC, may be obtained free of charge at the SEC's web site at www .sec .gov . In addition, investors and security holders may obtain free copies of the documents filed with the SEC by HP by contacting HP Investor Relations, 3000 Hanover Street, Palo Alto, California 94304, 650-857-1501, Investors and security holders may obtain free copies of the documents filed with the SEC by Compaq by contacting Compaq Investor Relations, P .O . Box 692000, Houston, Texas 77269-2000, 800-433-2391 . Investors and security holders are urged to read the definitive joint proxy statement/ prospectus and the other relevant materials (when they become available) before making any voting or investment decision with respect to the Merger .

4 printing instruction s privacy statement using this site means you accept its terms O 1994- 2002 hewlett-packard company Prepared by MERRILL CORPORATION Page 1 of 3 2 425 1 a2058608z425 .htm FORM 425

Filed by Hewlett-Packard Company Pursuant to Rule 425 Under the Securities Act of 193 3 And Deemed Filed Pursuant to Rule 14a-12 Under the Securities Exchange Act of 1934 Subject Company: Compaq Computer Corporation Commission File No. : 1-9026

The following is a transcript of a presentation made to members of the financial analyst community by Carly Fiorina, Hewlett-Packard Company's Chairman and Chief Executive Officer, Michael Capellas, Compaq Computer Corporation's Chairman and Chief Executive Officer, and Robert Wayman, Hewlett-Packard Company's Chief Financial Officer.

This document contains forward-looking statements that involve risks, uncertainties and assumptions . All statements other than statements of historical fact are statements that could be deemed forward-looking statements . For example, statements of expected synergies, accretion, timing of closing, industry ranking, execution of integration plans and management and organizational structure are all forward-looking statements . Risks, uncertainties and assumptions include the possibility that the market for the sale of certain products and services may not develop as expected; that development of these products and services may not proceed as planned ; that the transaction does not close or that the companies may be required to modify aspects of the transaction to achieve regulatory approval; or that prior to the closing of the proposed merger, the businesses of the companies suffer due to uncertainty ; that the parties are unable to transition customers, successfully execute their integration strategies, or achieve planned synergies; other risks that are described from time to time in HP's Securities and Exchange Commission reports (including but not limited to the annual report on Form 10-K for the year ended Oct . 31, 2000, and subsequently filed reports) ; and other risks that are described from time to time in Compaq's Securities and Exchange Commission reports (including but not limited to the annual report on Form 10-K for the year ended December 31, 2000, and subsequently filed reports) . If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, HP's and Compaq's results could differ materially from HP's and Compaq's expectations in these statements . HP and Compaq assume no obligation and do not intend to update these forward-looking statements .

HP and Compaq intend to file with the SEC a joint proxy statement/prospectus and other relevant materials in connection with the transaction described in this document. The joint proxy statement/prospectus will be mailed to the stockholders of HP and Compaq . Investors and security holders of HP and Compaq are urged to read the joint proxy statement/prospectus and the other relevant materials when they become available because they will contain important information about HP, Compaq and the transaction . The joint proxy statement/prospectus and other relevant materials (when they become available), and any other documents filed by HP or Compaq with the SEC, may be obtained free of charge at the SEC's web site at www.see.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by HP by contacting HP Investor Relations, 3000 Hanover Street, Palo Alto, California 94304, 650-857-5020 . Investors and security holders may obtain free copies of the documents filed with the SEC by Compaq by contacting Compaq Investor Relations, P .O. Box 692000, Houston, Texas 77269- 2000, 800-433-2391 . Investors and security holders are urged to read the joint proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision.

HP and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of HP and Compaq in favor of the transaction . A list of the names of HP's executive officers and directors, and a description of their respective interests in HP, are set forth in the proxy statement for HP's 2001 Annual Meeting of Stockholders, which was filed with the SEC on January 25, 2001 . Investors and security holders may obtain additional information regarding the interests of HP's executive officers and directors in the transaction by reading the joint proxy statement/prospectus when it becomes available .

Compaq and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of Compaq and HP in favor of the transaction . A list of the names of Compaq's executive officers and directors, and a description of their respective interests in Compaq, are set forth in the proxy statement for Compaq's 2001 Annual Meeting of Stockholders, which was filed with the SEC on March 12, 2001 . Investors and security holders may obtain additional information regarding the interests of Compaq's executive officers and directors in the transaction by reading the joint proxy statement/prospectus when it becomes available .

The following is a transcript of a presentation made to members of the financial analyst community by Carly Fiorina, Hewlett-Packard Company's Chairman and Chief Executive Officer, Michael Capellas, Compaq Computer Corporation's Chairman and Chief Executive Officer, and Robert Wayman, Hewlett-Packard Company's Chief Financial Officer .

Announcement of the Proposed Merge r

By

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and

COMPAQ COMPUTER CORPORATION

September 4, 2001 9 :00 a.m.

The Equitable Building Auditoriu m 787 Seventh Avenue New York, New Yor k

A VOICE : Ladies and gentlemen , please welcome HP Director of Investor Relations Steve Pavlovich.

MR. PAVLOVICH : Good morning, everyone. And thanks for joining us in person for this historic event .

I'd also like to welcome those of you joining us by telephone and Webcast . The speakers today will be Carly Fiorina, CEO of the new HP . Michael Capellas our new president. And Bob Wayman our CFO .

Our intent today is to build on the information that you've already seen in the press release. We've planned about 30 minutes of formal remarks, followed by a 45 minute Q&A session . For those of you attending by telephone you can access the speakers visually at our Web site at hp.com.

Just to remind those of you in the press, this meeting is primarily for the investment community . And as such, we will only be taking questions from them. We've scheduled a separate press conference at 11 :30 here in this room where you'll have ample opportunity to ask questions .

Before we get started we need to remind you that it's possible that some of our comments and responses to your questions may include forward-looking statements . These forward-looking statements are based on certain assumptions and are subject to a number of risks and uncertainties . And actual future results may vary materially .

We encourage you to read the risk factors described on the HP 10-K report for the fiscal year ended October 31, 2000 and in Compaq's 10-K report for their fiscal year ended December 31, 2000 and each company's subsequently filed reports for an understanding of the factors that may affect the companies' businesses and results .

Finally, HP and Compaq intend to file joint proxy materials and a prospectus with the SEC in connection with the transaction . This document will be mailed to our shareholders and be available on the SEC's Web site . We urge you to read these materials when they become available because they will contain important information about HP, Compaq and the transaction .

So without fu rther ado , I'd like to introduce Carly, Michael and Bob.

MR. CAPELLAS : I think about 18 months ago-

MS. FIORINA : Michael and I first met at a public policy conference, I think, in Washington, D .C. and we figured out quickly that not only did we agree on public policy which was significant, but we also had a common vision of where the industry was going .

MR. CAPELLAS : Yes, I actually remember we were in such agreement, if I recall, what we were really in agreement on we were listening to this public policy statement. And, "Are you really interested in this?" And you said "No ."

MS. FIORINA : We also then worked on the high tech exchange . And that went very well . And I think in that case we announced something very, very quickly. And when that public exchange was announced, much of the commentary was around how could we have pulled this off . And I think it had everything to do with, once again, a shared vision and a shared approach . And we agreed on just about everything as I recall .

MR. CAPELLAS : Yes, it was amazing . So we thought, we started with this concept of an exchange where we said, well, you know, how do you change the game for the benefit of the both companies. And if I recall, we got through the b asics in about 20 minutes on a phone call . http://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 3 of 32 MS. FIORINA: Yes .

MR. CAPELLAS : After that, it was just execution. But strategically we got there pretty quick.

MS. FIORINA : That's what today is actually all about . It's about changing the game, not only for our two companies, but we think for the industry as well . And we have a vision together that this industry is now changing in some fundamental ways driven by what customers want. And I think in many ways the economic downturn has amplified and accelerated the fact that customers are looking, frankly, for more from technology .

MR. CAPELLAS : And it is absolutely amazing. As we started to so rt of explore with what the two companies are doing, and obviously from a competitive advantage we watched very carefully . But as you started to look at the vision of what we were doing, where we believe the Internet is going fundamentally , what the strategy was, not only overlaid , but then you get to the cultural issues that is companies that both believe in innovation, really pointing the foundation , engineering excellence and a real drive . So in addition to the strategies, it was pretty clear the culture was the same .

MS. FIORINA : So then let's go ahead into our presentation and then we'll open it up for Q&A . I said earlier that we shared a vision, Michael and I, for how technology was changing and how, frankly, customers' requirements for technology are changing . And I think it's an important point.

The "90s, perhaps was the era of the hot box and the point product . This is now an era where customers demand more from their technology and more from their technology vendors . And what they are looking for is any end capability . They're looking for the ability to deliver that solutions capability on a truly global basis . And one of the great things about this combination is we now have bolstered our presence around the world in 160 plus countries with 150,000 employees .

Of course product leadership continues to be incredibly important . And we now have a leading line up from top to bottom from low end to high end, whether you're talking about servers, whether you're talking about access, certainly whether you're talking about imaging and printing . And we've significantly together bolstered our storage and our services and software capabilities as well .

We'll talk a lot about service . But as you know, both companies have been moving to bolster our capability to deliver consulting, outsourcing, as well as support. We have more work to do in this area, but certainly we have a much stronger platform now from which to build .

I said a couple of times now that customers' requirements for their technology vendor are changing. They are demanding more . They're demanding more in terms of return on investment, but they're also demanding more, frankly, in terms of vendors who understand and can manage the complexity of today's IT infrastructure .

These are two companies that share engineering prowess, dedication to innovation and invention . These are two companies who really do understand how complex today's IT enterprises are . And who also truly understand the benefits of open systems interoperability and standard platforms . Open, interoperable, standard. What all those things mean to customers is choice, flexibility and the customers maintain important control while they look to their partner to provide support and expertise .

We think what this combination is all about is building tomorrow's leader today . We say building because, quite frankly, we know we have a lot of work to do. But we also think that this combination represents something really different in the industry . I think, you know the specifics of the deal, but they're probably worth just highlighting a couple of things .

First, this is substantially accretive in the first full year of operations . We will talk a lot about our integration plan because it is key to unlocking the shareowner value of this combination . We do expect this transaction to close in the first half of "02 .

We have looked very carefully at the antitrust implications of this . We are planning to be very cooperative with all of the regulatory bodies that are involved. And we're comfortable that we can reach an agreement in this kind of time frame . I am absolutely delighted that Michael and I will be partnering together to create tomorrow's leader today .

And I started out, the two of us started out talking about when we first met because I think we realized very early on that we saw eye to eye, that we liked and respected each other, and t think it's going to be a terrific team . Not just at the top, but throughout the entire organization . It's all about delivering value to customers and shareowners .

And customers, again, want more than just a hot box . What they want now is a solution. And they want a solution that's clearly relevant to the business problems they're trying to solve. And they also want a solution that has a clear return on investment . And the economic downturn only amplifies and accelerates the fact that customers need more from their technology and the partners with whom they work . http://www. sec.gov/Archives/edgar/data/47217/000091205 701531328/a205 86082425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 4 of 32 This is a company, this new HP company will now be the number one consumer IT provider in the world . Number one in the SMB business . And as well, we now have scope and scale and the ability to challenge IBM in the enterprise space . We think this is not simply about product leadership . It is also about leadership in market and customer segments . And our geographic presence, as I mentioned earlier, is quite impressive .

We think together we have the best understanding of the challenges that our customers face . And we think together as well we have the best understanding of how to apply the benefits of open systems and standard platforms .

You all know that, as an example of this commitment to open and commitment to partnership, both HP and Compaq have announced our intention to build on the Titanium platform across the whole server line-up . It's just an example I think right down to the technology level of how we have interpreted an understanding of where the industry is going and applied it right down to technology choices day by day .

Michael mentioned culture . And, of course, culture is essential to a successful integration . There has been much written about the culture and the values of both of our companies . And, in fact, I think we've seen how closely those cultures and values are aligned just in how our teams worked together over the last several months .

First of all, as you know, we didn't have a leak here . There were stories this morning in the paper. But you will notice they did not reference company executives . This is a team that worked together effectively for many months . And I think we found in that process once again that these are teams that worked well together .

I think as well I mentioned we share a commitment to innovation, to invention, to engineering excellence and prowess . We share a deep contribution to communities . And we share common values of how you. ought to treat people . Respect, trust and integrity . So we think it's good for customers . We also think it's very good for shareowners . We think it's very good for shareowners, certainly from a value point of view .

This is a company now with the scale and the scope to aggressively take costs out of the business . And, in fact, we have $2 .5 billion of synergies in the first full year. We have planned the integration quite carefully . I will talk a bit more about that . We think these synergy numbers are realistic . We think they are achievable . In fact, in many ways we are going to be tasking our internal teams for more . But we thought it was appropriate given the execution challenges here to be somewhat conservative and realistic .

Clearly, this combination strengthens our ability to effectively leverage our channels. We're talking about our direct distribution model for PCs. We're also talking about our extensive network of channel partners . And one of the key drivers of value here will be our ability to aggressively use those channels .

And I mentioned as well, management depth . This is a stronger team together. We've looked carefully at the top team . And I'll talk a bit more about that when we get into the integration plans . We think also this permits, this new company to participate more effectively in the growth opportunities that both of us have seen independently .

We've talked a lot about solutions capability . We've talked about our number one positions . I want to pause for a moment on the fact that we believe we are now the partner of choice, the partner of choice to significant constituencies . Together both of these companies have a longstanding commitment to partnership . And we think we will be a much stronger partner to Microsoft, to Intel, to the SIS, like Accenture, like PWC, like KPMG . So one of our excitements about this combination is that we can build together even stronger partnerships .

Clearly, we have a world reknowned brand in HP that we will leverage . We're also going to be very smart about leveraging some of the power phone Compaq subgrams that are in the market today .

We have more work to do, admittedly, in services and storage and software . Each company independently has targeted services, storage and software as important growth opportunities going forward . We have more work to do . But nevertheless, this combination gives us a much stronger platform across all of those . And our storage position in particular we think is bolstered significantly by this move .

And finally, we will retain and we will remain very focused on the preeminent imaging and printing franchise in the world . We have a common strategy . This is not about a change in strategy . This is about a leap-frog move to accelerate our ability to continue on the strategy that we have been on, and, as well, Compaq has been on for the last two years .

If you go back and look at the presentations each company has made separately to the financial community, over the last 18 months in particular, I think you will see a great deal of commonality . Our strategy, as you know, our collective strategy is to enable these services, to enable an always-on Internet infrastructure, and to enable intelligent connected devices and enterprises . And by enabling these to transform businesses, to transform processes, to transform experiences, that consumers and small businesses and large enterprises can have .

Now, you know, it all looks great on paper . Maybe you buy it at this point that the strategic logic is compelling . We certainly do . Maybe you http://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by ME LL CORPORATION Page 5 of 3 2 buy even that customers are going to like this combination . But none of it will matter if we cannot integrate this effectively. I want you to know that we take the integration challenge exceptionally seriously . This is a massive integration effort . One could argue it is the largest integration effort in the technology industry. And we're trying to integrate in a very difficult overall environment . Price competition is fierce . Who knows when the economy is going to turn .

We at IIP are in the midst of a reinvention process . Compaq has been in the midst of its own transformation. Synergies are tough to get. They require decisiveness . They require speed. And they require the tough work of taking people out of the business .

And then, of course, there's the aspect of combining culture . The value in this combination lies in how well we integrate . Not how good the strategy looks on paper . And so we've spent a lot of time thinking about this . In fact, I will tell you that we had our first draft integration plan, fairly comprehensive integration plan on paper and agreed to between Michael and I before we called the bankers . Because we knew if we didn't figure out how to do this right, and we will, that the rest wouldn't matter.

I'm very delighted to announce the top level management team today . I think Michael and I will build a great partnership . What you see here in this organization's structure is the next step in the evolution of the organizational structure that both Compaq and HP had put in place . Both of us moved to what we would would call an HP front-back model, what Compaq would call go-to-market and product development . And this is the next logical step in that move . Because what we're doing is pulling together organizations that are now massive .

Each of these four operating units would be a Top 10 IT company in its own right. These are now companies with great scale. And we're trying to pull these product development and go-to-market units together so that we achieve an important level of customer and competitor focus .

I mention that we had a comprehensive integration plan . And one of the reasons that we established an integration office led by two highly regarded executives Webb McKinney of HP and Jeff Clarke of Compaq is because we had businesses to run .

Between now and the time this deal is approved, HP people have to stay focused on HP business and HP customers and Compaq people have to stay focused on Compaq customers and Compaq business . And so we can, however, while we stay focused on retaining our momentum and working with our customers, we can, as well, be planning in a very detailed way for this integration effort . And that is what we're going to be doing.

And you will see us announcing a next round of appointments over the next several weeks both in terms of staff reports to the CEO, as well as in terms of next level of management in the integration team . We have a comprehensive integration plan in place . We have thought carefully about product line rationalization . We've thought carefully about organizational rationalization . And we intend to be decisive . We intend to be disciplined and aggressive . And we intend to move with speed .

We have a key set of early decisions already made. And the managers that we've identified that we think are absolutely critical to this beginning going forward .. We already have retention plans in place . We will be appropriately leveraging outside expertise . This is one where you don't want to undergun it . So we will be working with people who have advised others who have done this kind of thing before . And as I mentioned, it will be critically important that we maintain our focus and protect our existing business .

Now, as difficult as product line rationalization is, perhaps what's more difficult is integrating a sales force . And so we have spent a lot of time and attention thinking about this problem .

First, we've chosen our executives very carefully . As you will note, we're delighted that Peter Blackmore will be leading our IT infrastructure business . He leads in part the Compaq enterprise sales force today . Webb McKinney who leads the integration efforts leads HP's enterprise sales force today. And those individuals will clearly have to be working very closely together to integrate these sales forces effectively when we are permitted to do so .

We are helped by the fact, as I mentioned earlier, that we have similar organizational models already in place . A go-to-market or front-end organization and a product development or back-end organization. And we're also helped by the fact that our sales forces are structured very much the same. That is, we have the same kind of structure around country management . We have the same kind of structure around what we would call customer business managers, lead account reps to a customer, and then product specialization and technical consult suppor t underneath .

That helps with the integration . Although there's no denying the fact that this integration will be complex, we think we've thought it through . And we think we are prepared for it . But we're very sobered about the fact that the value lies in how well we do this .

At this point it is my great privilege and pleasure to introduce a great leader and my partner, Michael Cape] las .

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MR. CAPELLAS : Thank you very much . And I will start off by saying to one of those people who absolutely wears their emotions on their shirt sleeves, that I am absolutely psyched and excited about the capabilities that we have .

I'd like to take a little time now to talk about exactly what the go-to-market capabilities are of this great new company and exactly how we plan to service some of these key markets . And I think when you really start, the highlights are this is an absolutely unique company in its ability to approach the market and the coverage it has in the market . At the enterprise level we now have the ability to truly architect every enterprise . And as anybody who's ever heard me say before, we are at a fundamental shift in the technology of how we think about what the Web's going to do, what's the Internet going to do .

It's about the next generation delivery situation . And virtually every customer that's out there . Having gone through sort of the hype and the power point of the Web is now thinking about how it actually rolls it out and makes it real .

And this company is uniquely positioned to really let us do that . We have some architects . And when you think about the Web, it's a heterogeneous world starting with massively high parallel systems . We do that . Starting with best in class, data center capabilities . By God, we do that. Talking about delivery of content engines and world leading industry standard servers that operate at the edge of the Web . We do that. Storage, both massive on the high end managing large storage complexes and, as importantly, distributed storage in the SANS . And we do that .

And then to link it all together with printing and imaging . The next generation which says that as we have this richness on the Web, people will continually want to think about how they image all this . Oh, by the way, we do that . And we do it awfully well .

And finally, the services capabilities to bring it together. Roll in the next generation access and what you have is a company that is capable of architecting every enterprise and doing it in a compelling way with an absolute world class set of products . So if I sound absolutely excited about this, by God, why wouldn't I be ?

As Carly said, fundamentally, also we're a company that knows how to do partnerships . When this finally comes through and when everything is put together, we will be the number one partner of Microsoft, of Oracle, of SAP, of Intel and of countless other companies . And with that that brings a capability of a core competency of partnerships . So there's a couple of companies who'll be able to claim to do it . All but only one company will be able to say that we can do it all in a message that uses absolutely the best of breed in the entire industry . The core capabilities achievable for both of us .

But it's not just about the enterprise . We'll also have a unique ability to scale down to small and medium business, a market where both of us have continually continued to grow . We'll be number one in industry standard product and the ability to tailor solutions and put those solutions together. And be able to deliver to the low end of the market . If I say low end, I mean the mid-market .

And finally, on the consumer side we are clearly the product of choice and the complete consumer IT company in the world . With great coverage across all categories, including if you really look at the innovation in the consumer side at a time when the industry truly needs innovation, look at the new next generation devices and hand-helds, wireless, digital players, digital imaging, and music to killer AP, we continu e to lead in innovation.

And another thing as we talk about these cultural changes, there is no question both of these companies have unbelievable design capability . And we will, without doubt, have the best engineering in the business . Couple that with our capabilities on the brand to really extend the brand and our capabilities to really have an outstanding retail outlet, and what you have again is a combination that not only makes strategic sense, but has the capabilities to truly service every part of market .

Take a look at a few numbers . As you heard, Carly said each of these companies will now be among the Top 10 in their segments in the IT world . Let's look at the numbers in the infrastructure . We have a $23 billion business . It is absolutely number one in terms of the infrastructure .

In access device, not only personal computers but the next generation of how really redefining how people get to the Web . We continue to be number one at $29 billion .

In printing and imaging and also the next generation of everything that will take to really put this richness of the Web from a digital point of view, number one in the world at 20 . And an absolutely growing services company number three at $15 billion and growing very, very quickly . So you can hear the words about our capabilities and then you can see the numbers . And you can truly see the power to truly architect every enterprise.

I think in the infrastructure side what is absolutely important when you think through why this is so compelling is to think about th e

http ://www.sec .gov/Archives/edgar/data/47217/000091205701531328/a2058608z425.htm 2/11/05 Prepared by MERRILL CORPORATION Page 7 of 3 2 complementary nature of the fit . And again, you have to think through it, of what we offer . Number one in fault tolerance in terms of our ability to do super scale . Great center complexity in being able to hit the edge of the Web . Accessdevices and storage and services . And what was amazing to us, as we actually said, of the two companies where are we strong, where do we need to continue to develop, went across the board market by market by market. The nature of the fit was absolutely incredible .

We'll continue to have the best products across these categories . And it's not only the capability of this company and what we do today . It is the unbelievable capability of this company to look at and innovate for the future . We have the best and brightest of the design engineers .

It also when it comes to selling, if you think about the nature of how people buy things, it's changing . People no longer want to buy the pieces and put them together . They want to buy the solutions which says you have a platform that can go horizontal, best of breed . And you have the expertise to not only put it together, I also like to say, keep it together and keeping it running . So the very, very strong customer service orientation of this organization continues to be one of its foundations .

You'll see us with a commitment to continue to build to open standards, continue to look at partnerships . As you think about things like the explosive growth that dot-Net will bring from Microsoft, our ability to take that capability, lead it on the edge of the Web . And then integrate it to the back-end in terms of the data center, this is going to be a core competence and one of the real foundations about how people think about it .

Also want to say there is no doubt with all that great stuff there's still our tremendous challenges . We have multiple architects we'll have to learn quick and get quickly across and be able to simplify our product lines. We'll have to use our engineering teams to continue to look at the product road maps and make sure they are clear, compelling and simplified for the customer .

We know we'll face competition on a number of fronts, particularly on low end pricing and our ability to really drive to competitive positions in our volume products . And of course as we go through, we'll have to continually keep the customer in mind and continue to support the customer in all their projects without disruption .

Some very clear action steps. Somebody will invariably say, "Well, when you announced your commitment to IA-64 and your Intel relationship to go across your product lines, gee, didn't that sound familiar?' "Yes ." "Did you have any idea that you were going to do that when you started that conversation?" "No.".

And so, in effect, what it showed was not only the fact that we now have a compelling architect which will unite our entire product set . But we're actually thinking in the salve way strategically. We'll continue to look at our product road maps, but there is an unbelievable pool of intellectual property between these two companies . And you'll see us be very aggressive about not only inventing new things, but to also use that classic invention with that classic innovation and take them to market . And, of course, obviously, to unleash shareholder value . We know that these mergers must, in fact, reduce reporting costs and we'll drive very hard to get that done .

On the access side a lot of people will say, well, jeez, look at your coverage in the PC market and isn't that a market that's suffering . Well, I have a different view. Anybody who doesn't believe that people will continue to grow on the Internet, that more and more people will access the Net and they'll access it in new and interesting ways .

So the question here is not about where the PC business has been . It's about where the Internet access business will be . Across the board in creating new categories, across the board in thinking about the next great generation of video streaming, audio streaming, and yes, oh, by the way, we will ultimately get to the time when you can truly do voice commands on your access device . And you really will get to the point where you can do something other than hitting a keyboard .

And my point is it's not about PC of the yesterday, it's about evolving the access of the future. And this is going to be a growing market . We have commercial leadership . We have consumer leadership . We will have the absolute leadership in convergence and wireless . And, of course, we also know that we got to continue now, in addition to innovation, look at changing the cost model and we will drive tighter costs, better inventory management and continue to unleash the power of this business .

Clearly, there is going to be tough challenges here as well . We know this business is going through one of a lull that we've never seen before . There's competitive pricing. There is pressure from direct distribution .

So the need to get out and really build a distribution model, continue to advance that distribution model is key . And we know we'll have to pull these multiple brands together . You'll see us drive hard on the cost structure . A lot of work being done on both sides.

And one of the interesting things as you think about the potential of this company, remember, both of us have not been sitting still for the last weeks and quarters. There is an awful lot of work being done, will now start to show up of the work we've accomplished . And I actually believe and think the things we've done as we bring the companies together you'll start to see not only the benefit of what we will do, but the benefit of what we have done . http:/lww-v.see.gov/Archives/edgar/data147217/000091205701531328/a205 8608z425 .htm 2/11!05 Prepared by MERRILL CORPORATION Page 8 of 3 2 Services is an absolutely golden opportunity . Think of it in a couple of different ways . This will be the world's largest, third largest services company with a huge install base, an unbelievably loyal customer base . And so simply the ability to take our profitable growing business, you can look at the numbers . This is already an organization that has size, it has scale, it has capabilities . And we are one of the truly, truly few companies that can do global service delivery .

As you think about all the other capabilities, think about the global reach of this new combined company . It is staggering . I talked about overlaying product road maps and said, my God, look at the complementary fit as we went region by region. You can also see it allows us to have critical mass in virtually every geography .

I was looking at Carly because we were sitting here going, okay, here's the product fit, looks great . Let's look at the coverage fit. It looks great. You saw the way that it complemented each other . And we went, you know, it's got to work . It's got to work.

Another thing that you're going to hear a lot of companies say, they're going to be in the service business. Well, we have both been in the service business for a long time . We're not exactly entering in this service business. We have a huge experience curve and now we need to take it to the next level . And again you'll see us continue to partner.

I also don't want to say there's not a whole lot of work to do . We have both faced the challenge of getting system integration front-end consulted . We've got to build here . Don't be surprised at all to see the two new companies continue to grow, continue to make strategic moves to bolster their front-end capability .

The managed service business and outsourcing business will go through explosive growth . And we clearly have the capabilities just to create unbelievable market in the second. You'll see us continue to fill out our solution step . We are very strong in subverticals . For example, telecommunications, financial service, but you'll see us move into more .

Obviously, the great advantage HP has in working/managing an area, Compaq has not been particularly strong in . One more time, the practices overlap . So what you'll see us do is aggressively go out and expand the capabilities . You'll see us continue to work as being, as Carly says, the partner of choice . Because when people come to us for solutions, not only will they see a company with capabilities, but one that's not afraid to reach into the outside world to say we can partner well to actually solve the customer's problem .

Imaging and printing, the preeminent franchise . I will tell you that having been in this business a long time I am about to become much more knowledgeable about imaging and printing than I am today. But I can tell you about, this is a great business . This is an absolutely great business . A massive install business .

And what's really important here, in my first view of the businesses when I saw, you sort of think of printing. Well, I want you to really focus on these words on imaging and printing . The Internet is about rich imaging. The Internet is about bringing richness to life . We no longer are putting dumb screens out there that are really ugly, photos, music . And the image to the Internet makes this a foundation of not only just printing but the ability to really take the next generation of digital imaging to continue to bring the world to life .

And you'll see unbelievable engineering. It's a company with great intellectual property . And I think in addition to being just a great franchise, it's got the capability of one more time to complete the solution of bringing the Internet to life.

I'll close here . If I appear to be extremely excited it's because I am . I believe that this partnership is a foundation that changed the industry . And to our employees and to our customers hang tight for the ride, because it's going to be an exciting one .

Thanks for your time . Now I'd like to introduce another one of my new partners, Mr . Bob Wayman .

MR. WAYMAN : Thanks Michael. And we are delighted to have you and your team to be pa rt of our team on a going-forward basis.

We really have a lot of big news here today . As is often the case, sometimes your boss goes before you and covers most of it . Now I have two of them in front of me to cover most of it . So I will be brief.

This combination is compelling not only in terms of the customer prospect , the strategic proposition, but also from a financial and shareowner value point of view for sure . Through this combination we're creating a broader , more balanced and diversified whole .

HP at $47 billion with its bi11ggest concentration in imaging and printing combined, with Compaq at $40 billion with its biggest concentrations in access and enterprise, together $87 billion with a third of the company revenue in access, 26 percent in enterprise, 22 in imaging and printing and 19 percent in services . http://w-wr.sec.gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425.htm 2/11/05 Prepared by MERRILL CORPORATION Page 9 of 32 While access is the biggest part of the mix, it is growing, we believe more slowly than some of the other business segments . Importantl y though there are real key growth opportunities within access that we think will bring us both growth and profitability in this important part of the business.

As Michael indicated, together we are going to be able to have a much more competitive cost structure which will allowus to bring better solutions to our customers .

As currently highlighted there are substantial synergies that will result from this combination . We've developed a detailed analysis of the synergy opportunities and you 'll see a summary of them here .

In admin and IT we look to reductions in corporate staff transaction processing personnel, work force support . And IT we clearly have the opportunity of rationalized overlapping IT investments .

In cost to goods and services, real procurement opportunities will be debt-leveraged across a huge volume of procurement.

In manufacturing and service delivery we have rationalization opportunities as well.

In sales, sales management redundancies leverage across channel relationships . People who work with our partners or SIS . And, of course, in sales administration as well .

In R&D, savings and increased efficiencies come from integrating our two important product development programs.

I'm not going to go through all the numbers here . But as you leave that bottom line number of 2 .5 billion, keep in mind that these are cost synergies only . In fact, we have offset what we expect to be the cost savings with some reduction in revenue as we go through the integration process . We do believe there are substantial favorable revenue synergies out in the future, but we have not built those into these numbers .

Regarding the timing of the synergies, we're expected to see them roll out as indicated here about $400 million in the first year, 2 billion in `03. And then becoming fully effective at $2 .5 billion on a run rate basis by mid `04. About two years after we expect to close the deal .

Now, these synergies are substantial and they contribute to a combination which is meaningfully accretive. Depending of course upon the assumptions that you use regarding the combined earnings base, we believe that these synergies will result in accretion of 20 percent or more by `03.

We assume no benefits from the synergy in the first quarter after we close this transaction. But we do see some small revenue losses as I indicated a amount ago . As a result, we expect the combination will be modestly dilutive in the first combined quarter and accretive thereafter.

Here's a look at the combined operating model . In the first column you see simply the combination of the two companies' results over the prior four quarters.

In the second column, our expected goals when the synergies are mature in '04 . Efficiencies for revenue, we continue to believe that we can grow at or above the industry growth rates in each of the sectors in which we compete .

We expect gross margin to end up in the 25 to 27 percent range . This is a function of both product mix as well as distribution channel mix . It's also impacted by what we think is better utilization of our manufacturing capacity as the economy recovers . And of course some synergies as noted.

In operating expenses we expect debt ratio as a percent of revenue to come down to 15 from 17 percent . Here the effects of scale as well as the many operating expense synergies that I just mentioned will impact the result. But put that all together and you get an operating margin in the 8 to 10 percent of revenue range and a net margin of 6 to 7 percent, which reflects, by the way, a blended tax rate of the two companies which is higher than Hewlett-Packard's current tax rate .

Important to keep in mind, we think there are opportunities for synergies in tax rate as we go forward as well .

And then finally, expect to look at the balance sheet which is a key asset for the new companies as we go forward . Cash and debt are both in the $7 to $8 billion range with therefore net debt at virtually zero .

The existing debt that we do have is largely related to supporting our customer financing assets . We believe this balance sheet strength as well http://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425.htm 2/1 1/05 Prepared by MERRILL CORPORATION Page 10 of 3 2 as a strong cash flow generation that we believe will develop on a going-forward basis will allow us to make the necessary and critical investments in new product and service offerings, provides strategic flexibility for the companies, which we feel is extremely important in this environment where there are many opportunities, and as appropriate, allow for opportunistic share repurchases .

All of this will result in a real and significant value creator as we bring these companies together . So that's it.

Carly, turn it back to you .

MS. FIORINA : All right. Before we open it up for your Q&A, let me just make two other comments . One, we've talked a lot about the benefit to our customers and our shareowners . And obviously we think those benefits are significant . But we think our partners, our employees and our communities will benefit as well .

I think both Michael and I have talked about both of these companies' long-standing commitments to partnerships, and therefore, our confidence that we will become and indeed are already with this combination, the number one partner of so many important players in the industry.

But as well., we share a common set of values about how you treat people . And that fundamentally is the bedrock of any culture . Both companies believe in treating people with trust, respect and integrity . We believe in creating opportunity for our employees . And both of our companies believe in the creation of performance-based meritocracies .

I want to spend a moment on community because both of these companies have long-standing commitment to contributing to the communities in which we live and work. Both companies believe that the benefits of technology should be accessible to all, everyone around the world . And you can count on the new HP strengthening its already very strong commitment to the communities around the world .

So I'm going to ask Michael and Bob now to join me up here and to take your questions . But we are truly excited about this combination . An S87 billion IT giant . Leadership not only across markets . By markets we mean consumer, small-medium business enterprise, we also mean regional leadership . We mean product

leadership . A set of synergies that are compelling, but we also think are realistic and achievable . A set of synergies that we have planned for .

We understand that we have a comprehensive integration plan in place . We've clearly got a great go-to-market engine . Michael mentioned many times as I think is absolutely right. Terrific IP portfolios . That both companies have a great brand .

In sum, this is about not only creating a new kind of industry leader and building tomorrow's leader today, this is about building the new HP way.

And with that we're going to open it up to your questions . We will start with taking questions here in the audience and then we'll go to the phones . We do have microphones .

VOICE: Could you comment on branding consumer corporate? In addition, could you comment why is this good for your channel as far as, you know, what's their feedback right now ?

And finally, I wanted to be clear on 2002 . You said basically the cost synergies will be offset by revenue declines so that net-net we're sort of kind of looking at no change in EPS and the synergies in Q3, and synergies in 4 questions actually . The synergies. The 20 percent accretion, that is with and without assumptions which share buy-back .

MR. WAYMAN: I can deal with the last two right away . The $390 million synergy number for "02 included both the expected cost benefits in "02 offset by some small revenue loss that we think could occur in the transition as well .

And in 2003, no, we have not assumed anything with regard to their buy-back . So to the extent we do end up using excess cash for that purpose, EPS would be helped .

MS. FIORINA : Michael , you want to take the channel question?

MR. CAPELLAS : Yes, I'll answer the distribution question .

I think you have a couple of components to that to the traditional eight-part question . So let me sort of break it down on the commercial side . httpa!ww~v.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 11 of 3 2 There is no question that we will continue to drive with a strong balance on both direct distribution as well as using our distribution partners . As you know, we use the same distribution partners in many cases .

And so what you'll see is a continued evolution of the hard work we've done in growing out the direct distribution capabilities and that will become a single delivery engine for major accounts and for the large national accounts . And you'll see us leverage that out . We have capacity in place that we can use . This quarter on the Compaq side will be about 70 percent direct on PC distribution and so that will allow us to drive that.

The secondary piece is that this will be absolutely good news for the markets we go with distribution . Because you'll be able to see snap products through on a single system. And so as opposed to the distribution partners now saying I've got to deal with everybody on two different methods, on two different purchase order systems, on two different receiving systems, there'll be some natural pull-through .

And again, what you've been able to see us do jointly, and its amazing when you look at the synergies, we have both been working with this snap all the way through and that's why our distribution parts have gotten a lot more inventory on retail . You will absolutely see us go to a convergence on the retail level . As I say, they are on both sides . Hewlett-Packard, if you look at the Compaq model has, it's grown up . A great job by HP in terms of really putting high velocity through on the retail side . So you'll see us leverage that.

One more time, if you think about distribution, great, great ways of coming together in a complementary nature . Compaq's direct work and the work it's done there. A common share exercise in getting partners to reach that market and a single view of replenishment on retail under a drive to a single system as well .

So one more time. And this is the heart of how the integration has to work . Very quickly, pick the best, go to the best . And get on with it very fast, okay ?

MS. FIORINA : On the brand question, HP will be the surviving brand . However, we will use Compaq's sub-brands that have power in the marketplace in a smart way, okay .

Other questions here from the audience? Yes, John .

VOICE : Thanks. Carly, I wanted to follow up on a comment you made basically stating we have more work to do in the services area .

When you look at your service business , 62 percent of it is supportive, fixed. IBM is at 15 percent . It really means that you've got a lot of work in expanding that business .

Can you talk about how aggressive you'll be in expanding it internally through organic growth versus external?

And Bob, can you, as a second follow-up question, Bob can you talk about the tax rate? It's not included in any of the forecasts . And you gave a $2.5 billion forecast for savings . How much of that is people versus synergies?

MS. FIORINA : Okay . On the services question, as I think most of you know, both Compaq and HP have been aggressively growing, internally for the most part, both our consulting and outsourcing capabilities and we need to continue to do that . And you'll see us continue to do that. I think it's fair to say that as well we will be looking for strategic opportunities to go outside to bolster that capability .

On the other hand, we need to be realistic . We have a massive integration effort that we're undertaking here . We can't bite off more than we can chew. But I think it's fair to say over the next 12, 24, 36 months, we'll continue to ramp up our internal capability, look for strategic opportunities and watch the space over the next couple of years .

I would also not want you to underestimate, again, this power of choice thing . If you think about the combination of these two companies and our opportunity, for example, to partner effectively in the marketplace with the company like Accenture, with a company like PWC . We think that combination is fairly compelling .

Just a final point I would make. And Michael may want to add something here . I think there has been a little bit too much sort of downplaying the value of a support business . Yes, the support business doesn't have the same growth opportunities as consulting and outsourcing . But I'll tell you what a support business does if it's a good one, it gives you great entree into customers . You're in there every day. It gives you an opportunity to build on great relationships and great expertise .

MR. WAYMAN : John, the tax rate question , there are no synergies modeled into that tax rate . I believe it's about a 26 percent tax rate . That is in that 6 to 7 percent net model which is a mix of the two companies . As we come together we do believe there could be opportunities to take, you know, the international manufacturing strategy that HP has used so well to perhaps drive tax rate a bit lower . But we 're not ready to commit http://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608c425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 12 of 32 at this point .

VOICE : Where do you get the 26 direct?

MR. WAYMAN : I don't know the answer to that yet. I think that's probably aggressive . But we really need a little bit more time to understand how this all comes together. Synergies, about three quarters of the synergies that you saw there of the 2 .5 billion relate to people . The other quarter relates to procurement fundamentally.

VOICE: Okay.

MS. FIORINA : Yes. Oh, I'm sorry . I'll come back to you . I apologize .

VOICE: Just two things if I could. Just if you could give us a sense in teens of the transaction itself, are there any collars, one way or the other, any limits, any time limits, any constraints in terms of pricing, any limits one way or the other that are in the deal ?

MS. FIORINA : It is a fixed exchange ratio .

VOICE: Minimum, maximum , anything like that?

MS. FIORINA : It's a fixed exchange ratio.

VOICE: Is there any point in terms of the antitrust to take a ce rtain amount of time that deal with expiring, like that ?

MS. FIORINA : All of the details of the transaction will be filed-

When are we filing the joint proxy, Bob?

MR. WAYMAN : I don't recall the exact date , but next month .

MS. FIORINA : Fundamentally we have planned no antitrust review process that's , you know, in the six to nine -month time frame.

VOICE: And lastly, just in terms of maybe give us a sense, you know, the background, bow this sort of came about, what the thinking was . Give us how long have you been talking about this . What was the final trigger?

MR. CAPELLAS : It started off actually with a conversation around in addition to the relationship that we described. Sort of an informal one, building, started really around a conversation Carly calling me on some licensing issues relevant to some intellectual property and go-to-market stuff. And as we started to think about, well, if we license this, there's some in the marketplace. But boy in the world of the Web, it interacts with this.

So what started here, started to go out and it came from sort of a natural outflow to starting to look at how the pieces fall together. All you have to do is go down their product line, our product line and our geographies . And you started to see it go pretty quickly . What's amazing, we started about thinking, licensing to intellectual property in some spaces . And it just, boom, went like that . Well, it just got bigger . And everybody's going to say when did the light bulb go off. Well, I think it just started . And it was almost like an avalanche and a snowball . Just started building, building momentum . And at the end of the day you look at it, it makes such logical strategic sense . It just sort of built.

MS. FIORINA : The only thing I would add is, you know, both Michael and I and our teams are competitive people . And when you're a competitor you watch what the other guy's doing . And I've been watching Compaq for some time . And 1 have known for some time, as I think Michael has because we've shared this, that these companies are talking about the same direction, the same vision, starting to make the same kinds of choices in terms of technology, in teens of organizational structure, in terms of how we deal with customers .

VOICE : Thank you .

MS. FIORINA : Then the gentlemen up there that I missed .

VOICE : I have three questions . I'll be upfront about it . The first one is-

http://www,sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htrn 2/11/05 Prepared by MERRILL CORPORATION Page 13 of 32 MR. CAPELLAS : A, B and C, right?

VOICE: Yes, that's right.

The first one is if you can just clarify the assumptions for revenue expectations for fiscal year '02 and'03 . If we were to take your separate plans together today, add them together for a pro forma for fiscal year'02 and '03, is the new company expected to have higher or lower revenue in '02 and'03 than what the summation of the individual parts would be today ?

MS. FIORINA : Okay. Bob.

MR. WAYMAN : So the plan that you saw here with the accretion references, the operating model, et cetera, assumes slightly lower revenue than the separate plans in both of those years . As I said, we have not built in some upside revenue synergy which we think would exist. Probably more likely in '03 than in'02, since we won't have that much time together in '02 .

MS. FIORINA : So put another way, it is not our intention to lose momentum in the marketplace . But in keeping with our desire to be realistic here, we think it is possible that there will be some revenue loss in 2002, as well as in 2003 . And so we've modeled that in . And while we believe there will be substantial revenue accretion going forward, none of that is built into these numbers.

VOICE: Is the model , the revenue decrease more than 5 percent, more than 10 percent, Bob ?

MR. WAYMAN : Yes, I'll comment . No, it' s not less than 5 to 10 percent .

VOICE : It's not less than 10 percent . So it's more than 10 percent ?

MR. WAYMAN : No . Revenue is, it drops by less than 5 percent, yes .

VOICE: The second question is it looks like you have about a 12 percent reduction in expenses, about 2 billion in the 2 .5 billion ongoing basis seems to be expense related as it goes to cost to goods sold . That's about 12 to 17 percent on your $12 billion combined .rate. Can you benchmark this?

Obviously, the debt integration, Bob, you were around for Apollo. Can you comment on, you know, what the reality check here that suggests that this is realistic . Because it's a big number, both in percent and in dollars ?

MR. CAPELLAS : We obviously did bench marks, not only against our own experiences that we've had plenty of real firsthand experience on that, but also on others within the industry .

Also look at some pretty interesting numbers outside the industry . The reality of it is if you look at the absolute number of people that are in those synergies, we believe their models conservatively .

Now, we're not going to get out ahead of ourselves . We intentionally went conservative on the plan . So what you never want to do is get out early on an expectation you can't meet. So if you look at the number at the end of the day, you're talking about 15,000 people out of 150,000 baseline on the employment synergies .

And so I think they are models conservatively . And it's exactly where we want to keep them . Not to exceed those, get out in front of ourselves . So I believe they are absolutely achievable . I believe if you benchmark raw numbers it's probably on the conservative side .

MR. WAYMAN : I think it's on the conservative side . And keep in mind here how much overlap there is in our product development , go-to- market, et cetera strategy . So there it's pretty achievable if you can get that kind of expense structure out of it .

MR. CAPELLAS : There's one more I'll add to it again just on absolutely . We at Compaq have taken 8,500 people out, some of which are expressed and you will see the results in our R&A, P&L. And I'll let HP comment on their own own activities as well . About a lot of that rolls going forward into forward-looking P&L . But a lot of that if you add up the joint reduction forces of the two companies announced, it's 15,000 . You add to it another 15,000, you have 30 . Obviously, some of the first 30 is reflected in P&L, but not a lot of it .

So you have the forward effects of the actions taken. Its not exactly like either one of us has been standing on our hands . And if you think of the new partner, I think you probably get that expense reduction is rationalized on a mathematical model . http://www. sec . gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 14 of 32 MS. FIORINA : If I can talk just to you about model . We talked about having a pretty comprehensive first pass integration plan before we called in bankers, before we put together a comprehensive integration plan, we put together a pretty comprehensive business plan. So each of us worked with McKinsey and Accenture to lay out what would this look like . So we've done a lot of work and a lot of planning and a lot of detail before we ever said this is a transaction we're prepared to do . We have, if I can go-1'm sorry, one more .

VOICE : One more.

MS . FIORINA: Yes.

VOICE: I get the final one . Just is how do you respond to potential critics who might say, look, this is clearly a cost focus deal, but have you really decreased a strategic issue here? Which is both of you have really been plagued on the low end in commodity oriented markets by Dell . And both of you have arguably been plagued at the high end with Sun and IBM who priced more integrated and higher availability solutions across a broader set of customers and platforms .

Why do you feel that this merger necessarily other than providing you with some scale, but fundamentally, you know, just reinforces your strategy which some may argue is kind of in the middle, you know, what strategically does this change vis-a-vis those two important matters? And that's the end.

MR. CAPELLAS : If you look at where, first place you accept that the future of the industry is in the ability to link best of breed products that perform specific functions in the industry. And that's where everybody is trying to get. And if you look at any shop is architected, that's where it goes. Let's get to a level , high end fault tolerance . Running extensions, huge volume . That certainly sounds like it to me . World class Unix with the data concentration and the interaction of those two .

If you go into it you will see a Himalaya running huge data stores surrounded by a series of Unix high databases . That makes sense to us . You then extend it out . And what you need to do to that is spend out to clustering capabilities . Sounds like Compaq . World class clustering capabilities . Number one position in SANS, really great work being done on both sides on virtualization on the software side . Putting those two together you have got an unbelievable storage point.

Now, you say what's missing . Some interoperability middle layer. Certainly sounds like system management's from open view to me . Extend that out with some really yet to be seen in the marketplace work on some business object, works around the middleware components to tie it together .

So you have if you look at the overlay it is unbelievable from a market point of view . Now pull it together with middle work . Now there's only one other company that can do that. The difference is we're not doing that on a purely proprietary across the board . You have to give me your entire infrastructure. We're putting that together with the best breed series of products that can be tied together . Missing component, add the services layer.

So on the high end the story is absolutely compelling. And even if you think about that, you got one more compelling story . It allows you to go into the entire install base and simply extend that . If we do nothing else but use these capabilities but to extend our install base, you've got a great story.

On the low end there's no question this is going to be tough to get off of it. Cost models, we're going to have to do very, very strong actions in . And here's a case where we believe there are cost synergies to be had . You have to get after them quick. And there's an indication again on the high end there's more of an extend out your capabilities . On the low end it's about driving a superior cost performance . And so, you know, from a strategic point of view I think it's absolutely compelling .

MS. FIORINA : I can only add two sentences. And that is, we think, obviously, this makes us a more effective competitor and clearly a more effective partner . And for those who don't believe it, watch . Okay?

We now have Laura Conigliaro on the phone . Good morning, Laura.

MS. CONIGLIARO : Quickly because it was hard to really hear your answer, Bob .

Could you please clarify, repeat the question, the answer that the assumed revenue drop I think you said it was less than 5 percent . Did you say for one year or the other year? I wasn't sure . And then I have a couple of questions . So maybe you can just clarify for me first.

MR. WAYMAN : So what I said was that the revenue decline we've assumed in this model is less than 5 percent for both years .

http ://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION rage i -) ul i/_ MS. CON IGLIARO: For each year .

MR. WAYMAN : For each year.

MS. CONIGLIARO: My questions are the following : A few things, first of all, on the procurement side what areas do you think represent good opportunities for further component discounting . Particularly, I know the volumes are going to be huge . But particularly in this kind of a market where there is such dramatic discounting going on, at least as far as we can see .

Also, you indicated, Michael, that you've already done quite a bit prior to this announcement . Maybe you can give us some idea-and when will you be-what will you be actually able to do prior to the actual combination taking place in the second half of fiscal '02 .

And finally, I don't know whether you've talked to any of your key enterprise customers yet, but whether you have or haven't, how will you keep them satisfied during a transition period that's going to be, if anything, even a little more difficult or disruptive potentially than what it would have been for each of you separately ?

Thank you.

MR. CAPELLAS : Excuse us. We're going to huddle for just one second ,

MS . FIORINA : Let me start with the customer things because it's critically important and it's one of the reasons why the sales force integration as well is important.

Obviously, it is one thing to rationalize product lines on paper . It is another thing to build transition plans for customers that protect their investments and protect the value that we've delivered to them . And so, we are going to be very careful about that . And it's one of the reasons, frankly, why we will not be making broad announcements too early about surviving product lines . Because we need to have the customer transition plans in place.

Obviously, realistically, this week is simply all about getting our employees in both companies adjusted and aligned to this new news . But rest assured, the heavy lifting of trying to think about and plan for, we cannot truly begin integrating until we have approval, but plan for the integration of the customer level will be key .

MR. CAPELLAS : Laura, to get back to your question , and I'll repeat the question, in this market it's not exactly like you're scrambling for parts now . How much lower can the pricing go? Because component pricing is already at bottom . And that is absolutely correct . But the cost is not in the individual components . Between 18 and 20 percent of all your costs are logistics . And the logistics can absolutely be rationalized .

The second thing is, even though that is interesting, the real cost savings comes from designing standard subcomponents and actually using fewer components. If you look at the product lines and the capabilities through design rationalization, what you're going to get to is combining standard subcomponents across multiple platforms and then reducing logistics. So those are the two components . It's not a piece part by piece part. It's not a pay $5 more for a particular component. It's logistics and common use of standard subcomponents which I think drive .

MS. FIORINA : I'm sorry . Just to add, I think it's important that naturally what people will think about when Michael talks about logistics, supply chain, what people will naturally think about all that applies to the computer side of the business and it clearly does . But our ability to drive a more effective logistics and supply chain model is hugely beneficial to our printing and imaging business as well .

And one of the things that I think is also beneficial to our printing and imaging business is joining forces with a company that really understands how to play effectively at the low end . Which for those of you who follow our imaging and printing business know it's a copy opportunity for us. So think about that low kind of set of efficiencies and applying across the portfolio now, not just on the computing side .

MR. CAPELLAS : Absolutely . Let me just finish the last question, the very specific question.

We had committed to 8,500 force reduction of which 5,500 is complete, to absolutely answer your question, Laura .

MS. FIORINA: We have Danny Kuntsler on the phone from JP Morg an. Good morning.

MR. KUNTSLER: Good morning . Two, three things . I notice on the slide an estimate of savings in the area of IT . Focusing on the IT for just a second, do you have any answer how long it will take you to integrate the activity, how much it might cost? http://ww-w.sec.gov/Archives/edgar/data/47217 ,1000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page Ib of i t MS. FIORINA : Daniel, I'm sorry for interrupting you . We're having a real hard time hearing you .

MR. KUNTSLER : I'm sorry . Is that better?

MS. FIORINA : Daniel, I'm sorry, we're having a very difficult time hearing you .

MR . KUNTSLER : I'll get back on the Q.

MS. FIORINA : Okay, thanks . When you come back we'll open it up .

Question here from the audience way in the back there.

VOICE: Questions . Can you talk some about any product divestitures that you do have planned? There's clearly a huge amount of overlap .

And then for you, Bob, when you talked about the synergies in terms of cost savings, you talked about them kind of by line . Can you maybe talk about them maybe in terms of the four operating entities that the new HP will comprise ?

And then, finally, Carly, when you look at the mix here, I guess from a strategic standpoint it seems like you are willing to have a higher exposure in terms of your overall PC sector, when in the past couple of years that had been a problem for the industry in general .

From a shared standpoint are you looking to gain share in the PC sector or basically to harvest share with the larger business ?

MS. FIORINA : Okay. Another complex, multi-part question here .

In terms of are we prepared to do divestitures to capture the value of this combination? The answer is absolutely yes . We think we have a good idea about where those make sense .

You know, Tom, that HP has been pruning its portfolio already and will continue to do that . But as I tried to indicate earlier, we're going to be very thoughtful about how we expose those pending divestitures or decisions about product line rationalization to the marketplace to be sure that we've marketed it through with our customers appropriately ahead of time .

But I think one of the impressions you should get from the comments that both Michael and I have made about fairly comprehensive integration plan, pretty comprehensive business case done before we ever decided to move ahead here . We have a real clear idea of how we're going to get this done and what are the surviving product lines, and which, perhaps, are divested.

MR. CAPELLAS : Can I? I'll comment on market share there . I encourage you to look at the PC market share numbers in slightly different ways going forward is, one, as opposed to discounting basic desktop units, start thinking about the entire mining share around access devices, wireless, hand-fields, digital imaging, extension of the next generation devices .

And so the idea is to gain an increasingly larger share of what is the next generation access devices and not worry so much particularly about sort of just traditional standard desktop, standard based boxes, we like to call it .

So as you look at this business there's an awful lot of interesting parts of it which is why I think we've got to be thinking about differently . One of the things I'm most excited about, collectively, this really gives us the ability to really think about the business of Internet access in a little bit different way.

MR. WAYMAN : To the questions of synergies by business . Let's pretty much put imaging and printing aside . That's not where most of the action is here .

And some of the synergies like Admin and IT really span functions that support all of the remaining three . Beyond that, PCs and industry standard servers would be an area where we have substantial overlap and expect to see significant change . Enterprise space a bit less and services a bit less .

VOICE: So in terms of the overall cost synergies you're expecting, I would infer from those comments, that primarily they're going to be coming out of the various different PC businesses at this point, or at least the majority of them do .

MR. WAYMAN : When you say "the majority," I would say the intensity is greater there than the rest. There will be some institutions like http ://www.see .gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared. by MERRILL CORPORATION Page 17 of 32 procurement and Admin and IT will affect all the others.

VOICE: Thanks .

MS. FIORINA : I think that before we wrap up here, I guess the last thing I would say because obviously the PC business is an important topic, it's an important piece of the business that we're putting together and it's a business that's gotten a lot of attention lately, we hope that we've demonstrated this morning that this combination is about so much more than the PC business .

But I think as well, it's important, Tom, to your question to understand that we have examined all alternatives independently and collectively . We've examined the alternative, well, why don't we just get out of the PC business? But it doesn't make sense to get out of the PC business . It doesn't make sense to get out of the PC business because, as Michael suggests, there is growth and opportunity left in that business . It doesn't make sense to get out of the business because I think people lack an understanding of what the business really is .

Fundamentally, it's more about brand and distribution than it is about manufacturing .

And third, it doesn't make sense to get out of the business because it's an important part of a solution bundle . An important part of a solution bundle in the consumer space, particularly with our printing and imaging franchise . It's an important part of the solution bundle in small and medium business . And it's clearly an important part of a solution bundle. And an entree from the commercial desktop into the rest of the enterprise . But don't think we didn't look at it carefully . We did . We think it's the best choice and we think it makes us a much more effective competitor .

We appreciate very much all of your attendance today . For those of you on the phone, thank you for joining us . There'll be lots more opportunity here .

Bob and Jeff will be taking a lot of questions as the day goes on. Thank you for attending . We think this is one great day for the people of HP and the people of Compaq. Thank you very much.

The following is a transcript of a question and answer session conducted with members of the media by Carly Fiorina, Hewlett-Packard Company's Chairman and Chief Executive Officer, Michael Capellas, Compaq Computer Corporation's Chairman and Chief Executive Officer, and Robert Wayman, Hewlett-Packard Company's Chief Financial Officer .

Announcement of the Proposed Merge r

By

HEWLETT-PACKARD COMPANY and COMPAQ COMPUTER CORPORATION

September 4, 2001 11 :00 a.m.

The Equitable Building Auditorium 787 Seventh Avenue New York, New Yor k

MS. FIORINA : Good morning, everybody . Is this what you want?

MR. CAPELLAS : How are you? You want us to look this way? We'll give you a look .

http ://www. sec .gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425 .1itrri 2/11105 Prepared by MERRILL CORPORATION Page 18 of 3 2 MS . FIORINA: I hope all of you know by now that Michael and I have announced this morning the merger of HP and Compaq . We think this combination is truly compelling for customers, for shareowners and represents an entire opportunity for our collective employees as well . What we'd really like to this morning is take your questions . So without further ado, let me open it up here . We'll take a couple from the floor and then I'll go to the phones . Yes, sir .

PUBLIC SPEAKER : I'm Patrick from BBC .

MS. FIORINA : Hello, Patrick .

PUBLIC SPEAKER : Hello. In light of the GE/Honeywell, have you done specific lesson about European regulators, do you have a team in place to deal differently with Brussels? What is the strategy and what do we learn about this difference given it's about competition, your competitors in Europe and about consumers in North America and finally do you like Mario Monti? Do you respect Mario Monti ?

MR. CAPELLAS : Absolutely to the last question.

MS. FIORINA : Let me start with, I don't know about Michael, but I personally have never met Mario Monti yet . I look forward to doing so in the very near future and actually am planning a trip to visit him in the next several weeks when it's appropriate but I certainly respect him .

I think we have learned the following: One we have studied this matter, I think, exceptionally carefully. We have had a joint team working on antitrust joint team of lawyers working on antitrust trying to understand this for many weeks now . We intend to be very cooperative with the European Union and look forward to working with them . We think this is an industry frankly that's quite different from the industry that GE and Honeywell were participating in . This is an industry with millions of customers, not a couple . It is an industry with very low barriers to entry, particularly the PC and low end of the server business . It's an industry with intense competition as is clear in Europe and the United States and all around the world. So we think there's some fundamental differences but that is not to say that we won't be working very closely with them in making sure that we can comfort them that this is pro-competition and pro-customer .

PUBLIC SPEAKER : Just as a follow-up to that, have you looked at any business in particular? Is there anything that where you sense that there could be some issues going forward? Have you gotten any indications yet from them, and then secondly, could you talk a little bit more about the 15,000 job cuts? How many are coming from Compaq, from HP? Do you have some sort of geographic breakdown? Obviously Europe, Asia . Sorry, Caroline from Reuters .

MS. FIORINA : First, I think it's fair to say that we have not had discussions yet with the regulators . We just announced this very early this morning. So it would have been premature to begin those conversations . I think it's also important to recognize that shares in all of the businesses in which we compete are very volatile . They're moving around all the time and reflective of the intensely competitive nature of the industries that we participate in and the product line that we have . But as I tried to indicate earlier, we have thought carefully about how we can ensure that this merger is pro-competitive and we have some thoughts there and I'm sure we'll be looking forward to filling those thoughts out as we work in a cooperative way with the EU as well as regulators here in the United States . You want to take on the employee question ?

MR. WAYMAN : With regard to the headcount reductions that I mentioned within the synergies, we do not at this point have a quantitative or geographic breakdown . If you saw the functional breakdown , you realize that things like admin and sales are really around the world. Those functions exist everywhere . Certain others such as production and R&D are speci fic to and where our locations are . We're not ready to put a quantitative geographic answer out yet .

PUBLIC SPEAKER : Steve Burks, CRN . Carly, could you talk a little about both companies are putting together rules of engagement right now for their partners, and HP in particular is putting together a hard product and services that's very precise and clear? It's a lot different than the Compaq Plan . Could you talk about which of those plans will take precedence in terms of the rules of engagement, number one, and then could you talk about how you plan to merge the two channel organizations and who will oversee that ?

MS. FIORINA : Okay. The answer is not yet on all of those but t think it's important and then I'll pass it onto Michael here . I think it's important to recognize that until we have full regulatory approval, we must continue to compete vigorously as stand-alone companies in the marketplace. And so Compaq's approach t o

the channel will survive until we have regulatory approval and HP's hard get program which is working well for us, will absolutely survive . We will remain focused on it, again, until we have regulatory approval.

PUBLIC SPEAKER : Can you talk about your philosophy, Carly, on the services and how the partners are going to play versus the services organization and maybe, Mike, could you do the same thing just philosophically ?

http ://vviN,w.see.gov/Arebives/edgar/data/47217/0000912057015'1 1328/a205 8608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 19 of ' 2 MS. FIORINA : Well, actually I'm going to pass it to Mike because I know he'll say something that I agree with it .

MR. CAPELLAS : There's no question that, as we look at first place, it's one thing that I'm particularly pleased with . If you look at both organizations at the end of the day our relationship with all of our channel partners is-we know it, they know it, we collectively worked on it- collectively we are going to become more efficient .

If you look just at a simple time like the past four or five months, the work that both companies have done to drive velocity through our channel partners is just remarkable. Now, one of the reasons why we've done that was because we both had to . And if you look at, for example, if you would just benchmark the level of inventory that's carried, it is down about 40 percent with both companies and so this is just goodness for the marketplace. So one thing I feel very good about the model is that it's a great way to say we are extending reach and we're doing it with a velocity model that makes sense, huge progress on both sides . If you look at what we're both doing, we've now gotten to this concept of auto- replenishment-which by the way both sides were doing some hard numbers . Collectively, add the two together, we are collectively doin g $30 million a day in auto-replenishments-of the two . This is-you know, auto-replenishment is up.

What are the high-level messages? We've all got the same philosophy about efficiencies . We both need a lot of work . We'll combine that and we'll continue to make it even more efficient. We'll drive lower inventories down and that's good news for both of us and collectively we know that's the best way to do it .

PUBLIC SPEAKER: Any message for channel partners who might be fearful of the conflict?

MR. CAPELLAS : I believe the channel partners should say we all collectively know that inventory is the enemy. Velocity is the friend and we are collectively going to do that together . Second thing I know is, while we both do it, we both do it in very different systems, procedures, EDI messages, you name it, and there is a pure administrative efficiency in doing it once . The other thing this is going to do, which is huge, the other enemy is the number of SKUs and products that are carried . This will allow us to dramatically simplify the products that it sells, which case, you get one more time . It creates the next enemy which is obsolescence and imbalance between supply and demand.

So all good news. Now, one of the tricks here is we're not particularly ready to announce it today. We've done a lot of work on the systems side and I think you'll see some real improvements on the system .

The services question, I once again don't believe this is necessarily a question of conflict at all . We do different things because we reach different customers . There is no question that the ability of the channels to one be vertically oriented . Create specific solution sets and then be able to service those on a very, very broad basis . We'll continue and that will continue well .

What collectively we have not yet, either company, done as well as I would like-and I don't think we'll get much disagreement-is actually have package solution sets that you can take out of the box and, boom, be able to service that . So this whole concept around solutions, you heard us reference complete solutions for a small, medium business . This is the home run for the channel . It's got to be better.

MS. FIORINA : Bottom line, hang with us . This is going to be a great merger.

We're going to take a call from Tom Power on the phone from the Houston Chronicle .

PHONE CALLER: Thanks very much for the time . Forgive me if lget this wrong . My understanding when it comes to manufacturing : Compaq has done more in developing a direct model than HP has . The impression I've gotten over the years was HP has done more on the outsourcing side.

Second case, I guess, is the current Compaq capability going to be able to handle the combined companies? Is that going to expand? Talk a little about the actual making of the machine .

MR. CAPELLAS : The first statement was from Tom Power from Houston, that we-Compaq, on the Compaq side we've done more on the direct model capabilities and HP has done more on the outsource manufacturing and I would absolutely agree on both statements . In fact, it is one of the first things we noticed as another one of those great complimentary things . We have capacity to drive more direct volume where w e

need it from major accounts and we'll be able to leverage the capability we have, and this will be a good thing because factory utilization in our direct capability will go up.

We are very pleased with the service level agreements and so, this process, we have spent a long time with this . We're also very, very pleased with our ability to use those capabilities to drive cycle time to the channel now . I just was talking about velocity . We are now sub-we are under four days fulfillment to our channel partners . So I mean it's not just direct . It's also the ability to go direct to the VARs . This will be a good thing . http:Uwww.see.gov/Archives/edgar/data/47217/0000912057015 .31328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 20 of 32 We will use and we will drive more business to those engines and we will get improved velocities.

At the same time, and Bob was referring to it this morning, there is a very solid outsourcing model which has been used very effectively by HP. It allows you to flex your manufacturing . And that's at the core components . On the sub-component level it works extremely well. It is also very tax-effective. We already announced that we would be going to more outsourcing in Houston of the manufacturing model . That is not yet to be fully executed but it has been announced. It's already inclusive in forced-reduction numbers that have been previously reported, but the model we will use is the method of which HP very effectively outsources its manufacturing capability .

Again, numbers in terms of forced-reduction on the Compaq side have already been announced and that's well underway . But the model works very well. So the net result is you get direct distribution capability both for your end customers and for your VARs absolutely . You've got an outsource model that seems to work very well, absolutely . Use the best of both worlds.

MS. FIORINA : I'm going to ask Toby Elkman from an advertising agency .

PHONE CALLER : Hi. Congratulations on your news .

MS. FIORINA : Thank you .

PHONE CALLER : I wonder if HP, and Compaq for that matter, both individually, you've worked very hard to raise your brand, you've spent lots of money in doing that, and I wonder what the future of your collaborative marketing and channel efforts are going to be . Will there be an effort setting up of a central marketing organization? Who will run it? Sort of what your interim, your transition, plan for this-for the marketing .

MS . FIORINA : Okay. First, we are not going to be announcing today our complete structural plans around marketing. That will be coming over the next several months . But let me talk a little bit about the spend which is what you're referring to . First, I' ll repeat that HP will be the surviving brand but we're going to use the sub-brands of Compaq smartly . When I mentioned to the analysts that we were talking with earlier today, that we had done a fairly comprehensive business plan around this combination and a fairly comprehensive integration plan around this combination before we ever called the bankers in to actually do a transaction . One of the things in that process-by the way, we did that because we knew we needed to be clear-eyed and sober about how to get this done-and the fact that this was going to be, well, an extraordinarily exciting and powerful combination, also a combination that was going to take a lot of hard work .

Having said all of that, one of the opportunities for synergy that was initially identified was, well, you could stop spending as much on advertising and branding because you're going from two brands to one . And we actually rejected that synergy and said we don't think we'll be spending less . We think it will be important for us to spend the right amount of money to transition these brands effectively, to position the combination effectively, to make sure our customers, our partners, and our employees understand what we're doing here . So you should not think about branding or advertising or marketing synergies as being in the numbers that Rob has talked about in terms of spend-around messaging .

Yes, there is synergy around how we go to market through channels which Michael has talked eloquently about, but in terms of the branding and advertising messaging, explaining this combination and making the appropriate transitions we think we need to spend as much as the two companies have been spending to date .

Okay, we'll take one more, Bruce .

PUBLIC SPEAKER : Okay. Thank you . Would you be doing this deal if you didn't think the technology business was stabilizing? Should we infer anything about what you think about the state of tech spending? And if tech spending, if the lights go out again, to recall that phrase, does this imperil this deal?

And what was the tipping point? I know we couldn't pin you down before, but was there a tipping point, a Eureka moment, for this deal? What made you decide this was going to be a merger, this was not going to be just some sort of technology alliance ?

MS. FIORINA : Okay. We'll kind of do a pas de deux here .

I think, first, that there is not a event or a trend in the marketplace around technology spending that would cause us to say this deal doesn't make sense . This deal makes sense, frankly, in good times and in bad. I think this deal perhaps makes particularly good sense in tough times for technology because what those tough times are illustrating clearly is that there is an opportunity to get more cost-effective and efficient . There is an opportunity for us to create a lot more synergy and value for our customers and as I said to the earlier meeting, I think what the economic down-people have asked why is technology getting hit harder during this economic downturn than other industries? I'll tell why I think it is. Because I think there's something else fundamentally going on in how customers view technology and how customers purchase technology . And what customers are saying, and what is being amplified by this downturn, is : I want something different, I want more value . I want more choice. I http: //www.see. gov/Archives/edgar/data/47217/000091205701531328 /a205 8608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 21 of 32 want more options . The truth is this. I haven't gotten enough return on my investment .

So we think it's a great time to do it but we didn't do it because of the economy . We did it because we think together we can offer what customers really want and do it very effectively .

MR. CAPELLAS : I would absolutely echo that. We absolutely took ve ry hard questions of ourselves because that is the rational question when you start to say, okay , this is really going to happen. Now, are you doing it-does this make as much time in really good times as it does now? And I think both myself and our board, both boards , the management team said, absolutely this makes strategic sense . And so that's it. So you got to admit it is easier to do when times are tough because you have impetus , you have drive, and it gets you there . So while it is absolutely the right choice in good times or bad, it's probably easier to execute in tough times because you're focused on getting it done .

The second one is, I absolutely agree with what Carly said. This is all about customers are going to buy things differently . There's a part of the story that I don't believe is written long enough is customers are really stepping back and saying, I invested in this idea, I went through this great internet bust . Now let me really think about what I need to do and I want to do things differently . And that's what we keep saying . They don't want to put the pieces together . They want to buy IT as a utility . They really want a trusted partner who can do it all and there's only going to be a couple of companies that are going to be doing that and we are absolutely one of them .

MS. FIORINA : The last thing I would just say, Bruce, to your Eureka moment . I actually don't think, at least for me, it wasn't a Eureka moment. It was a gathering momentum . It started 18 months ago when I think both of us thought, you know, we think a lot alike about a lot of things . It was sort of a flashing light in the back of I think both of our brains about 12 months ago when we saw how much our visions, you know, when we look at each other's material . We go on the web and say what is the other guy doing? What's the message? You know what, it was really a lot to say. Then we started seeing each other take the same moves in the market . And so I think it was a gathering momentum that began with a phone call from me to Michael about let's see if we can do some licensing work together . And the further we went, the more sense it made, the more planning we did, the more confidence we gained, that, yeah, this is a big damn deal but we can pull this off .

MR. CAPELLAS : Yeah, and it really-- the chemistry of the whole thing is extraordinary. The ability to have really very, very frank conversations and they were easy . They were never strained. What's extraordinary is, I mean, this is a big deal . So there were some tough moments . There's interesting negotiations, but there was never any real strain which is almost extraordinary, absolutely extraordinary .

MS. FIORINA : And with our teams as well . You get a good sense when you're going through these things . We had worked on a couple of things previously . Michael and I had put together the first public exchange for the IT industry . And you watch how teams interact because if it doesn't happen naturally it's not going to work . And it happened naturally .

MR. CAPELLAS : On that point we had three teams-quite a number of teams but there was a technology team of these folks who were just having a good old time . So that was working really well . There was a finance team which had extraordinary chemistry . It was absolutely- then we had communications team that was actually able to-so that's the point when you step back and say the economics are clear . The strategic fit is clear. Will the chemistry and the culture work? And when you actually can watch it is when you so rt of say, yeah, this is actually going to work. While the teams weren't huge, they were some of our best and brightest as you would hope and they got along really well .

MS. FIORINA : We're going to take a call from Peter Brennan of Bloomberg News .

PHONE CALLER : Thank you very much. I appreciate it . Now, you say that the newly merged company will have 15,000 job cuts . Now, how many employees will your companies have after the job cuts-and your press release says you'll have over 145,000? I just want to be clear on that.

And the second question is, can you give the actual dollar amount for what you are projecting for revenue for 2002 and 2003? And the name of the new company will be Hewlett-Packard, is that correct ?

MS. FIORINA : The name of the new company will be Hewlett-Packard . You asked if we were going to give specific revenue numbers for 2002 and 2003 . The answer is no . But I think as we indicated earlier, we have modeled some revenue loss in 2002 and 2003 . We have modeled no revenue upside and, Michael, you want to talk about the headcount question ?

MR. CAPELLAS : Yeah. I think the numbers go like this . If you. take already-announced programs, you have 62,000 from Compaq and 87,000 from Hewlett-Packard, which rounds close enough . It's 149. Let's call it 150 less 15 is 135 . I think that's how the math works . Close enough.

MS. FIORINA : Yes, ma'am .

PUBLIC SPEAKER: Hi, I'm Maureen with Mercury News . I'm wondering, why do you think Dell has been able to make money on its P C

http ://www.sec.gov/Archives/edgar/datal47217/000091205701531328/a2O58608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 22 of 32 business whereas you guys have been less profitable? And also, if HP is the surviving brand, what will consumers see when they buy PCs in future? Will it look just like your products now or some sort of combination ?

MS. FIORINA : Why don't you take the Dell making money question because I know you just love this question.

MR. CAPELLAS : And I never heard it before . I will go back to the question I raised to VAR News . It is-the difference in economics is not about product sets. It's not about components . It's about inventory and velocity . Once you get through the inventory, when component prices are declining, inventory is the enemy and the fact of the matter is our collective models have too much inventory. That is the difference . You focus and drive that. When you drive inventory out, then superior design starts to take over and that is where you get benefit. So this is a question about driving inventory velocity which is why you hear us talk about the ability to have low cycle times, simplified components and the ability to be able to really snap through auto-replenishment through .

The model is compressing to a snap-through model on auto-replenishment coupled with direct distribution for major accounts is the difference you have to get through . So velocity of inventory is the question .

On the product side, I'd say, go through the product sets . They are great products on both sides . There are cases where certain products are absolute-you know, product sets are classically a home-run business . You either knock it out of the park or you sort of very quickly put your bat down and walk back to the dugout . There are some absolute great product line-ups with a lot of synergy . It's not going to be universal. We have some great products . HP has some great products . Collectively we will match the products up, but we will move very quickly in standard sub-components so that we will have the cost-efficiency .

So it's a pretty good product line-up . But I can guarantee you it won't be all one set of products, al I the second set of products . One plus one will not equal two when we consolidate the product sets . There will be simplification of product line around the best families of products .

MS. FIORINA : Let me make one last set of comments on is this . We talked a lot about the synergy . So let me just highlight another one . As we have said many times, we're profitable in our consumer business . Compaq is profitable in their commercial PC business . Nice how that kind of works together.

The other thing I'd ask you to do is go look closely as what's in Dell's PC business and how they report those numbers and I think you'll find out that there is a little bit of difference in terms of the amount of services that's reported . So I think this is an assumption that people have in the marketplace that hasn't been appropriately tested .

Yes, sir

PUBLIC SPEAKER : Hi. Ongi Sak, Communication Business Magazine . Congratulations on the merger today. Few questions, please . First question is : HP's printer business given today HP's printer is a profitable . . .

MS. FIORINA : Yes, we love our business . Michael loves it, too .

PUBLIC SPEAKER : Compaq product, how can you leverage your printer business?

And second one is to how to prevent bureaucracy . Managers Mr . Josie or Ms . Eva Moore have to supervise a lot of employees at the new company, so how can you prevent the bureaucracy in a big company? Thank you .

MR. CAPELLAS : The one thing that I believe has unbelievable power of how we prevent bureaucracy is if inventory is enemy on the other side, bureaucracy is enemy on this side . These are very clear busines s

models which are by market and will now have services. If you worry only about services side-which will be able to drive the three business models, which are outsourcing, customer service, and consulting and drive that down, she'll have design of the programs . She'll have execution . Peter Black, the same thing, enterprise . You have development and you have to go to market on the sales force . It will share a common sales force. On the access side, we'll be able to take our access business and create a business model which is right from access . Business model for enterprise and business model for access, while they have both, development in sales or back in front-end have got to now drive that vertical integration . The power of putting everybody in P&L that has a products development in sales or back in front driving it straight down the business line, all within a P&L, all with the ability to make the decisions that are best about that model .

For example, on the access side, they'll obviously want to go to a lot of call center and support for the sales model and shift the sales model . On the enterprise side, obviously much more customer touch point . And, of course, the printing business is a great business . You'll probably not notice us making a whole lot of changes to printing. It works pretty dam well and so each business model has a P&L based around the marke t

http ://www.sec.gov/Archives/edgar/data!47217/000091205701 53 1328/a2058608z425 .btrn 2/11 /05 Prepared by MERRILL CORPORATION Page 23 of 3 2 and is vertically integrated up and down, with upstream and downstream . This is a great way to go to market and stay focused on that and take those to models .

There will be some cross-sharing. For example, a guy named Mike Winkler says he has a supply stream . Snaps across with all the efficiencies and some of the sales force will be shared where it makes sense . But it is that orientation that might distract you . We have thought long and hard.

Go back to the question you asked, one of the bell weather things is we actually sat down one day and for five hours talked about organization . To me that was one of the interesting meetings .

MS. FIORINA : So printing and imaging, one of the things that people asked me when I first came to HP is, why don't you spin off the imaging and printing business? And, in fact, there's been a lot of discussion about it . Why don't we change fundamentally the nature of the HP portfolio? And the reason I didn't do that, and the reason this combination is so powerful for the imaging and printing business, as well as for the computing business, is because we are now entering a new era where physical and virtual are coming together . What that means is the network-connected experience is becoming image intensive . We can gain great benefit in our imaging and printing business from the emphasis on low cost distribution and low cost supply chain. So that's at the cost level .

We can gain terrific leverage for our imaging and printing business because our computing franchise is now stronger and more powerful . And what we're really talking about is using the combination of imaging and printing and computing to create new industry transformations . Let me give you one example, and this is one that we're quite excited about with our partner Cannon in Japan : Commercial printing . Commercial printing is an opportunity to transform a process that is today time intensive, labor intensive, static and inefficient. It drives a ton of printing opportunity. But to capture that opportunity, we not only have to have a commercial printing technology that is formidable and watch this space, but we also have to have the compute infrastructure behind it because it turns out to capture commercial printing, there are a lot of servers and a lot of storage and a lot of software and a lot of services . So we think it's an opportunity for cost reduction and there's also an opportunity to go capture a set of opportunities that depend on both of those engines being strong .

Yes?

PUBLIC SPEAKER : Matthew Siegel, with NHK . On the press release you mentioned five groups in which you'll have a number one position and three in which you'll have leading positions . If you take those eight groups and define that as your market, would you say you have a number one position or a leading position ?

MR. CAPELLAS: These are highly competitive spaces so what you have is, you have, you know, a leading position means that you have thought leadership, you have brand awareness, and you're competing hard in that space . You know, am I going to get hung up on the semantics of it, no . But our goal is the leading position says that you will have thought leadership and you have mind share of the customer and the ability to go to market.

MS. FIORINA : I guess the way I would wrap it up and, unfortunately now we will have to wrap it up, this is in our judgment a game change . This combination changes the game that we are playing here .

Thanks very much. Have a great day .

(At this point in the proceeding, the conference was adjourned.)

The following is a series of slides that were presented at the presentations and the question and answer sessions described above .

i n v u f t

september 4, 200 1 http://www.sec .gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 24 of 32 • $25 billion transaction value

• stock-for-stock merger

• fixed exchange ratio : 0 .6325 hp share per compaq share • expect substantial accretion to pro forma eps in deal summary first full fiscal year (2003) • closing expected lh02

• 5 compaq directors to join hp boar d

• leadership :

Carly Fiorina

chairman & ceo

Michael Capellas

president

• solutions capability • product leadership a shared vision • services delivery of what • ability to manage complexity • open, market-unifying architectures customers want • innovation and invention • choice

• solutions strategy • leadership across markets - enterprises, smb & consumer what we can • leadership across products IPS, IT infrastructure, deliver to access, storage, services • best understanding of customer customers challenges - industry standard to high-end • defining new open architectures • culture, values, invention

value creation for shareowner s value drivers: growth drivers : • scale • strongest solutions capability • $2 .5b in expected annual • #1 positions http://www. sec .gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425 .htrn 2/11/05 Prepared by MERRILL CORPORATIO N Page 25 of ' 2 cost synergies • partner of choice • substantially accretive to pro forma • brand cps in first full fiscal year • services, storage and software • strengthens direct and channel • imaging and printing models • management depth

enabling transformation transformation of. • customer experiences • employee experiences • business processes • industries • life experiences

ernar,L3nc e ser :e s

accelerating a common strategy

t

.- I r

c . ice ari l t 7, 1 C, I le -LUTre

• a massive integration effort • a difficult overall environment challenges • in the midst of reinventio n • synergies and headcount • combining cultures

deep, experienced managementm team

http://www.sec.gov/Archivesledgar/data/47217/000091205701531328/a2058608z425.htm 2/11/05 Prepared by MERRILL CORPORATION Page 26 of 32

• led by webb mckinney and jeff clark e • decisive, aggressive , comprehensive comprehensive • early decisions mad e integration • key managers identified, i retention plans in place • leveraging outside expertis e • protect existing busines s

• evolution of existing go-to-marke t sales force structures • customer and competitor-focused mode l integration • similar organizational structure s

enterprise • architecting every enterprise

http ://www.sec. gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425 .htm 21/11/05 Prepared by MERRILL CORPORATION Page 27 of 32 • market-unifying architectures • partnerships unique scope small/medium business • #1 in industry standard and market • tailored solutions • channel and. direct capability coverage consumer • leading consumer IT business • excellence across categorie s • brand and retail presence

leadership and balance across the business

revenue rank*

IT infrastructure 1

access device s 1 printing & imaging 1

services 3

*based on year 2000 data; source: IDC, company dat a

• highly complementary fit • best products across key growth categories IT infrastructure : • deep understanding of customer complexity leadership products • broad expertise in industry standards • solutions-selling opportunitie s • leadership in open architecture transition

challenges

• multiple architectures • low-end pricing/competition • customer transition IT infrastructure

http ://www. sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 28 of 3 2

action steps

• speed path to IA-64 • merge and integrate r&d • leverage r&d investment • reduce operating cost

challenges

• highly competitive pricing environment • direct distribution pressures • multiple brands

action steps

• improve overall cost structure • capitalize on compaq's direct distribution channel • crisp brand transition access devices

• third largest worldwide • profitable and growing • substantial resource s • 15,000 consultants • 10,000 outsourcing • 40,000 support • global services delivery • experience curve • strong in mission-critical, services : industry standards, key breaking verticals into the top tier • deep partnerships

challenges

littp ://www.sec,gov/Archives /edgar/data/47217/000091205701531328/a2058608z425 ,htm 2/11/05 Prepared by MERRILL CORPORATION Page 29 of 3 2

• front-end consultin g • evolution of outsourcing • filling out the solution set • scale and profit improvement

action steps

• capitalize on partner of choic e status • rationalize IT systems and processes • build presence and mind share services • vigilant focus on customers

• massive installed base imaging and • leadership across commercia l printing: and consumer • high-margin, recurring revenue the preeminent • expanding into adjacent market s franchise -commercial printin g -digital imaging • strong patent portfoli o

a more balanced revenue mix

*All data based on estimated trailing four quarters . Source : SEC filings, press releases, and company estimates .

ebit impact (run-rate in q2 http ://www.sec .gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 30 of 32

category fj O4)

admin/IT $625

cost of goods and services $600

sales

r&d $425

indirect purchasing S250

marketing $12 5

total $2,500

workforce reduction = 15,000

source : company estimate s

• fy2002* - $390 million • fy2003 - $2 .0 billion expected • fy2004 - $2 .4 billion synergy timetable

* partial year source: company estimates

• expected to be accretive to pro forma eps in first full fiscal year based on planned financial impact synergies • estimated to be dilutive to pro forma cps in first quarter of combined operation and accretive thereafter based on synergies

operating model

pro forma long-term http ://w-",w.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 31 of 32 combined* target comments revenue growth at/above industry growth by segment as % of sales gross margin 24 .9% 25-27% mix, utilization, synergies operating expenses 20 .1% 15-17% reflects synergies operating margin 4 .8% 8-10% net margin 4 .1% 6-7% reflects blended tax rate

* based on trailing four quarters; excludes one-time charges

a strong balance sheet

pro forma balance sheet combined*

7,069 7,607 25,611 66,648

29 .7% 11 .4%

*based on latest reported quarters

wiii oen Iit

$87 billion combined revenue • leadership across markets ® leadership across products ® $2.5 billion in expected annual cost synergies go-to-market engin e ® global footprint ® intellectual property ® leading global brand the new hp way http://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a2058608z425 .htm 2/11/05 Prepared by MERRILL CORPORATION Page 32 of 32

This document contains forward -looking statements that involve risks, uncertainties and assumptions . All statements other than statements of historical fact are statements that could be deemed forward-looking statements . For example, statements of expected synergies, accretion , timing of closing, industry ranking, execution of integration plans and management and organizational structure are all forward-looking statements . Risks, uncertainties and assumptions include the possibility that the market for the sale of certain products and services may not develop as expected ; that development of these products and services may not proceed as planned ; that the transaction does not close or that the companies may be required to modify aspects of the tr ansaction to achieve regulatory approval ; or that prior to the closing of the proposed forward-looking merger; the businesses of the companies suffer due to uncertainty ; that the parties are unable to transition customers , successfully statements execute their integration strategies , or achieve planned synergies. Other risks that are described from time to time in HP's Securities and Exchange Commission reports, (including but not limited to the annual report on Form 10-K for the year ended Oct. 31 . 2000, and subsequently filed reports); and other risks that are described from time to time in Compaq's Securities and Exchange Commission reports (including but not limited to the annual report on Form 10-K for the year ended December 31, 2000 , and subsequently filed reports). If any of these risks or unce rtainties materializes or any of these assumptions proves incorrect , HP's and Compaq 's results could differ materia lly from HP's and Compaq 's expectations in these statements . HP and Compaq assume no obligation and do not intend to update these forward-looking statements .

http ://www.sec.gov/Archives/edgar/data/47217/000091205701531328/a205 8608z425 .htm 2/1 1105 FOR IMMEDIATE RELEASE

Hewlett Family Members and William R . Hewlett Revocable Trust To Vote Against Hewlett-Packard/Compaq Merge r

PALO ALTO, CA, November 6, 2001 -- Walter B . Hewlett, Eleanor Hewlett Gimon, Mary Hewlett Jaffe and The William R . Hewlett Revocable Trust announced today that they intend to vote their shares of Hewlett-Packard Company (NYSE : HWP) against the proposed merger of Hewlett-Packard and Compaq Computer Corporation (NYSE : CPQ) if the transaction is brought before Hewlett-Packard's stockholders for a vote . Mr. Hewlett also announced that he has been informed by an independent committee of The William and Flora Hewlett Foundation that the Foundation has reached a preliminary conclusion to vote its Hewlett-Packard shares against the merger.

Walter B . Hewlett, Eleanor Hewlett Gimon and Mary Hewlett Jaffe are children of Hewlett- Packard co-founder William R. Hewlett. Walter Hewlett is a trustee of the William R . Hewlett Revocable Trust . That Trust, the Hewlett Foundation and the family members together own more than 100 million shares of Hewlett-Packard stock .

Mr. Hewlett stated, "After careful deliberation, consultation with my financial advisor and consideration of developments since the announcement of the merger, I have decided to vote against the transaction . I believe that Hewlett-Packard can create greater value for stockholders as a stand-alone company than as a company combined with Compaq . Hewlett-Packard has a strong tradition of innovation and product development, a highly profitable printer and imaging business, a strong foundation for expanding its outsourcing and consulting services business and an extremely talented work force .

"I firmly believe that partnering with Compaq will not give Hewlett-Packard what it needs most to create additional stockholder value - expansion of its printer and imaging business as well as the higher-end segments of its services and server businesses . The combination woul d dramatically increase Hewlett-Packard's exposure to the unattractive PC business and dilute current stockholders' interest in Hewlett-Packard's profitable printer business . Given the lack of stockholder benefits, I believe the extensive integration risks associated with this transaction are not worth taking." -

Mr . Hewlett noted :

- acquiring Compaq would significantly increase Hewlett-Packard's exposure to PCs - an area that is neither growing nor profitable ;

- the merger would substantially dilute the current stockholders' interest in Hewlett- Packard's profitable printer and imaging business ;

- acquiring Compaq would expand Hewlett-Packard's exposure in the lower-end server business - an area that has been less profitable for Hewlett-Packard than the higher- end segment of that business ;

-more- -2- - Compaq's services business, which is more focused on support than outsourcing an d consulting, is not the type of services business that Hewlett-Packard should be seeking to grow ;

- the merger would distract Hewlett-Packard management and the rest of the Hewlett- Packard employees from concentrating on areas in which Hewlett-Packard excels and should be expanding;

- the uncertainty created by the merger could cause existing and potential customers to delay orders or to purchase products from Hewlett-Packard's competitors, which could have a significant and long-term adverse effect on revenues ;

- during the extensive and complex integration process, there is likely to be significant disruption and uncertainty among Hewlett-Packard's employees, which could lead to loss of extremely talented individuals, loss of focus and ultimately loss of market share as a result of a delay in the introduction of new and improved products ; and

since the announcement, the outlook for Compaq's business has declined dramatically -- making the prospects for any benefits to Hewlett-Packard from a combination even less likely .

Mr. Hewlett is being advised by Cooley Godward L LP for legal counsel and Friedman Fleischer & Lowe LLC as financial advisor .

About Walter B. Hewlett Walter B . Hewlett, an independent software developer, serves as Chairman of The William and Flora Hewlett Foundation, where he has been a director since its founding in 1966 . Mr. Hewlett is also a trustee of the William R . Hewlett Revocable Trust . He has served since 1987 on the Board of Directors of Hewlett-Packard Company and since 1999 on the Board of Directors of Agilent Technologies, Inc . He was elected to the Board of Overseers of Harvard University in 1997. In 1994, Mr . Hewlett participated in the formation of Vermont Telephone Company of Springfield, Vermont and currently serves as its Chairman . He founded the Center for Computer Assisted Research in the Humanities in 1984, and currently serves as a directo r of the Center . He also serves on the boards of The Public Policy Institute of California and The Packard Humanities Institute . Mr. Hewlett is the son of the late Hewlett-Packard Company co-founder, William R . Hewlett.

Contacts :

Joele Frank / Todd Glas s Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449 otetheHPWay.com I newsroom I HP Statement On Hewlett Announcement Page Iof 1

hp home I search

Awl "M L"Ifl-i a n e n t www.VotetheHPway.co m

merger hom e press release s

newsroom press releases HP Statement On Hewlett Announcemen t -~ speeches } media contact Palo Alto, CA -- November 6, 200 1 advertising campaign Hewlett-Packard Company issued the following statement :

-r why support this merger e-mail update s While we regret very much the Hewlett family's decision , rletters to shareowners Stay informed about the SEC filings we are not surprised . The HP Board of Directors and H P merger via e-mail . and Compaq remain fully committed to the merger an d e-mail add ress media contact expect shareowner approval, HP's S-4 registratio n investor relations statement will be filed within the next several days and wil l board of directors serve as the basis for thoughtful shareowner evaluation . zip cod e - contact us

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